You own 25 percent of Unique Vacations, Inc. You have decided to retire and want to sell your shares in this closely held, all-e

Question

3 years ago

11

You own 25 percent of Unique Vacations, Inc. You have decided to retire and want to sell your shares in this closely held, all-e

quity firm. The other shareholders have agreed to have the firm borrow $1.5 million to purchase your 1,000 shares of stock. What is the total value of this firm today if you ignore taxes

Business

1 answer:

Akimi4 [234] · Answer 1 · 2022-04-19T02:32:31+03:00

Answer:

$6 million

Explanation:

If 25% of the firm is worth $1.5 million, then 100% of the firm will be worth $6 million (= $1.5 million x 4).

This is an all equity firm, which means it has no liabilities, and it is also a closely held corporation which makes it harder for a stockholder to sell his/her shares. Basically the fair value of the 1,000 shares is the money you can get from your fellow shareholders.