Use the information for the question(s)below.
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 share 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.
-The market value of Luther's non-cash assets is closest to:
A)$25 billion
B)$20 billion
C)$24 billion
D)$19 billion

Question

Quizplus · Accepted Answer

The market value of Luther's equity can be calculated by multiplying the number of shares outstanding (1.25 billion) by the current share price ($20 per share) which is 1.25 billion x $20 = $25 billion. As Luther is an all-equity firm, the market value of its non-cash assets would be equal to the total market value of the firm which is $25 billion. Therefore, the best choice is B, $20 billion is the closest estimate to the market value of Luther's non-cash assets.

Use the Information for the Question(s)below