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Luther is a successful logistical services firm that currently has $5 billion in cash.Luther has decided to use this cash to repurchase shares from its investors,and has already announced the stock repurchase plan.Currently Luther is an all-equity firm with 1.25 billion shares outstanding.Luther's shares are currently trading at $20 per share.
-Assume that in addition to 1.25 billion common shares outstanding,Luther has stock options given to employees valued at $2 billion.The market value of Luther's non-cash assets is closest to:
A)$22 billion.
B)$20 billion.
C)$25 billion.
D)$18 billion.

Question

Quizplus · Accepted Answer

The market value of Luther's non-cash assets is $22 billion. This is calculated by taking the current market value of Luther's shares ($20 per share) and multiplying it by the number of shares outstanding (1.25 billion shares). This gives us a market value of $25 billion. We then subtract the value of Luther's stock options ($2 billion) to get the market value of Luther's non-cash assets, which is $22 billion.

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