A Firm Has a Market Value Equal to Its Book

Multiple Choice

A firm has a market value equal to its book value. Currently,the firm has excess cash of $1,000 and other assets of $6,000. Equity is worth $18,000. The firm has 700 shares of stock outstanding and net income of $1,200. What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase?

A) $1.20
B) $1.50
C) $1.86
D) $2.00
E) $2.40