Ask Question
11 August, 11:47

Henderson's is an all-equity firm that has 135,000 shares of stock outstanding. Neal, the financial vice-president, is considering borrowing $220,000 at 7.25 percent interest to repurchase 20,000 shares. Ignoring taxes, what is the value of the firm?

+5
Answers (1)
  1. 11 August, 13:16
    0
    The value of the firm is $1,485,000

    Explanation:

    For computing the value of the firm, first, we have to compute the price per share which equals to

    = Borrowed amount : repurchase shares

    = $220,000 : 20,000

    = $11 per share

    Now, the value of the firm should be computed. The formula is used which is shown below:

    = Price per share * Number of outstanding shares

    = $11 * 135,000 shares

    = $1,485,000

    Hence, the value of the firm is $1,485,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Henderson's is an all-equity firm that has 135,000 shares of stock outstanding. Neal, the financial vice-president, is considering ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers