Please show exact formulas/ equations to get the answer. Thank you! Pewter & Gla

Question

Please show exact formulas/ equations to get the answer. Thank you!

Pewter & Glass is an all equity firm that has 80,000 shares of stock outstanding. The company is in the process of borrowing $300,000 at 9 percent interest to repurchase 20,000 shares of the outstanding stock. What is the value of this firm if you ignore taxes?
HINT: You know the number of shares outstanding, but you don't know the price per share. You can, however, determine the share price based on how many shares you can buy back with the debt the company is borrowing.
$1,200,000
$420,000
$300,000
$80,000
None of these <---- "None of these" is not the right answer

Explanation / Answer

Price of share = 300,000/20,000 = 12

Value of firm = 15(80,000) = 1,200,000

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