Alpha Corporation and Beta Corporation are identical in every way except their c

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Alpha Corporation and Beta Corporation are identical in every way except their capital structures. Alpha Corporation, an all-equity firm, has 9,100 shares of stock outstanding, currently worth $16 per share. Beta Corporation uses leverage in its capital structure. The market value of Beta

Alpha Corporation and Beta Corporation are identical in every way except their capital structures. Alpha Corporation, an all-equity firm, has 9,100 shares of stock outstanding, currently worth $16 per share. Beta Corporation uses leverage in its capital structure. The market value of Beta

Explanation / Answer

Since Alpha Corporation is an all-equity firm, its value is equal to the market value of its outstanding shares. Alpha has 9,100 shares of common stock outstanding, worth $160 per share, so the value of Alpha Corporation is: VAlpha = 9100($16) = $1456,00

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