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kodGreya [7K]
3 years ago
15

A firm has a market value equal to its book value. Currently, the firm has excess cash of $300 and other assets of $6,200. Equit

y is worth $5,000. The firm has 500 shares of stock outstanding and net income of $720. What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?
Business
1 answer:
Jlenok [28]3 years ago
8 0

Answer:

new earnings per share is $1.53

Explanation:

Given data

excess cash = $300

Equity is worth = $5,000

other assets = $6,200

stock outstanding  = 500 shares

net income = $720

to find out

new earnings per share

solution

we know that equity per value is Equity / stock outstanding

that is

equity per value = (5000 / 500) = 10

equity per value = $10

and

we can purchase equity with excess cash $300 that is

= excess cash / equity per value

purchase equity with excess cash = (300 / 10)  = 30

purchase equity with excess cash = 30 shares

so

after repurchase we have balance share is =  (500 - 30) = 470

balance share = 470 shares

so that

new earnings per share will be = net income / balance share

new earnings per share =  (720 / 470) = 1.53

new earnings per share is $1.53

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2 years ago
Check the correct category for each of the following items. Note: for purposes of this exercise, consider cash in and out for th
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Answer:

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Cost of business trip = variable

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3 years ago
Why do credit card companies typically require small minimum payment amounts on their customers' monthly credit card statements.
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3 years ago
During March, the production department of a process operations system completed and transferred to finished goods 25,000 units
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Answer:

175,000 units

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total transferred units = beginning work in progress units + number of units started and completed

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3 years ago
A watch manufacturer incurs a variable cost of $10 per watch and fixed costs of $400,000. To earn a 25 percent markup on selling
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Answer:

$22.50 per unit

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Using mark-up,

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6 0
3 years ago
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