A Firm Has a Market Value Equal to Its Book

Multiple Choice

A firm has a market value equal to its book value,excess cash of $1,000,and equity worth $17,800.The firm has 5,000 shares of stock outstanding and net income of $31,200.What will be the new earnings per share if the firm uses its excess cash to complete a stock repurchase?

A) $7.20
B) $6.50
C) $6.61
D) $5.89
E) $6.23