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juin [17]
3 years ago
5

A firm has a market value equal to its book value. Currently, the firm has excess cash of $1,200 and other assets of $7,800. Equ

ity is worth $9,000. The firm has 600 shares of stock outstanding and net income of $760. What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?
Business
1 answer:
Ray Of Light [21]3 years ago
4 0

Answer: $1.46

Explanation:

Earnings per share = Net Income/Number of shares

Value of shares at current = 9,000/600

= $15 a share

Excess cash is $1,200.

Using that, the following number shares can be purchases;

= 1,200/15

= 80 shares

New number of shares = 600 - 80

= 520 shares

New EPS

= 760/520

= $1.46

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