2. A firm has a market value equal to its book value. Currently, the firm has excess cash of $400 and other assets of $2,600. The firm is 100% financed through equity. The firm has 300 shares of stock outstanding. a. What is the stock price per share at the beginning, assuming the market value equal to book value? b. If the firm decides to spend all of its excess cash on a share repurchase program. How many shares of stock will be outstanding after the stock repurchase is completed? What will be the stock price per share? c. If the firm decides to spend all of its excess cash on a cash dividend program. How many shares of stock will be outstanding after the dividend is paid? What will be the stock price per share? I
2. A firm has a market value equal to its book value. Currently, the firm has excess cash of $400 and other assets of $2,600. The firm is 100% financed through equity. The firm has 300 shares of stock outstanding. a. What is the stock price per share at the beginning, assuming the market value equal to book value? b. If the firm decides to spend all of its excess cash on a share repurchase program. How many shares of stock will be outstanding after the stock repurchase is completed? What will be the stock price per share? c. If the firm decides to spend all of its excess cash on a cash dividend program. How many shares of stock will be outstanding after the dividend is paid? What will be the stock price per share? I
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:2. A firm has a market value equal to its book value. Currently, the firm has excess cash of
$400 and other assets of $2,600. The firm is 100% financed through equity. The firm has
300 shares of stock outstanding.
a. What is the stock price per share at the beginning, assuming the market value equal to
book value?
b. If the firm decides to spend all of its excess cash on a share repurchase program. How
many shares of stock will be outstanding after the stock repurchase is
completed? What will be the stock price per share?
c. If the firm decides to spend all of its excess cash on a cash dividend program. How
many shares of stock will be outstanding after the dividend is paid? What will be the
stock price per share?
I
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