The market value balance sheet for Cherry Pie Corp. reflects a cash of $22,000, fixed assets of $209,000, and equity of $231,000
1 answer:
Answer:
The correct answer is D.
Explanation:
Equity = $231,000
No. of outstanding shares = 5,000
Price of share =
Price of share = $46.2
Repurchased shares worth $18,000
No. of shares repurchased =
No. of shares repurchased = 390
When the shares would have been repurchased then the value of equity would decrease by the same amount.
Revised equity = $231,000 - $18,000
Revised equity = $213,000
No. of shares outstanding = 5,000 - 390
No. of shares outstanding = 4,610
Thus, the price of each share would be:
Share price =
Share price = $42.60
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Answer:
d.the company is precisely breaking even.
Explanation:
Margin of safety is referred to current sales - Break even sales ratio to current sales as a percentage.
Basically it is quoted as follows:
Therefore, when the current sales = Break even sales then only the company will have margin of safety = 0
Thus, at 0 margin of safety the company basically is at no profit no loss situation, that is break even.