Thompson & Thomson Is an All Equity Firm That Has

question 62

Multiple Choice

Thompson & Thomson is an all equity firm that has 500,000 shares of stock outstanding. The company is in the process of borrowing $8 million at 9% interest to repurchase 200,000 shares of the outstanding stock. What is the value of this firm if you ignore taxes?

• A) $20.0 million
• B) $20.8 million
• C) $21.0 million
• D) $21.2 million
• E) $21.3 million

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Definitions:

Managers

Individuals responsible for planning, leading, organizing, and controlling an organization's resources to achieve specific goals.

Employee

A person employed for wages or salary, especially at non-executive level.

David A. Garvin

A respected academic known for his contributions to the fields of management, business strategy, and quality management.

Learning Organization

A company that facilitates the learning of its members and continuously transforms itself to better respond to changes in the environment.