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ikadub [295]
3 years ago
13

Uptown Interior Designs is an all equity firm that has 40,000 shares of stock outstanding. The company has decided to borrow $1

million to buy out the shares of a deceased stockholder who holds 2,500 shares. What is the total value of this firm if you ignore taxes?
Business
1 answer:
LuckyWell [14K]3 years ago
5 0

Answer:

The answer is $16 million

Explanation:

Outstanding shares = 40,000

Shares of deceased shareholder = 2,500

Amount borrowed = $1m

We calculate price per share:

This is,

1,000,000 ÷ 2,500

= $400

To get the total value of the firm:

[(40,000 - 2,500) × 400] + 1m

=(37,500 × 400) + 1m

= 15,000,000 + 1,000,000

= $16,000,000

The total value of the firm without taxes is $16 million.

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<u>Answer: </u>

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