The Jean Outlet is an all-equity firm that has 152,000 shares of stock outstandi
ID: 2728711 • Letter: T
Question
The Jean Outlet is an all-equity firm that has 152,000 shares of stock outstanding. The company has decided to borrow $1.1 million to repurchase 7,500 shares of its stock from the estate of a deceased shareholder. What is the total value of the firm if you ignore taxes?
C.
E.
The Jean Outlet is an all-equity firm that has 152,000 shares of stock outstanding. The company has decided to borrow $1.1 million to repurchase 7,500 shares of its stock from the estate of a deceased shareholder. What is the total value of the firm if you ignore taxes?
Explanation / Answer
ANSWER:C $ 22 293 333
Market value of 7500 shares to be repurchased= 1.1 mn = 1100000
So, Value of the firm= Market value of 152000 shares= 1100000/7500*152000= $ 22 293 333
OR
Market value after repurchase
Value of Debt 1 100 000
Value os equity shares - 1100000/7500*(152000-7500)= 21 193 333
Total value of firm= 1 100 000+21 193 333= $ 22 293 333
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.