The value of the firm is $52,680
calculation of the firm's value
The Montana hills co. has expected earnings before interest and taxes of $8,100
Debt with both a book and face value of $12,000.
Finding the VU is the first step.
VU= [$8,100 ×(1 - .34) ] ÷.11
VU=($8,100×0.66)÷.11
VU=$5,346÷11
VU = $48,600
Let's now determine the firm's value.
VL= $48,600 + (.34 ×$12,000)
VL=$48,600+$4,080
VL= $52,680
Hence, the company's valuation will be $52,680.
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