CT Stores Has Debt with a Book Value of $325,000

question 61

Multiple Choice

CT Stores has debt with a book value of $325,000 and a market value of $319,000.The firm's equity has a book value of $526,000 and a market value of $684,000.The tax rate is 21 percent and the cost of capital is 11.2 percent.What is the market value of this firm based on MM Proposition I without taxes?

• A)$923,250
• B)$1,003,000
• C)$984,300
• D)$851,000
• E)$769,750

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Definitions:

Unspoken Assumptions

Beliefs or ideas that are implicitly accepted without verbal confirmation or evidence.

Critical-Thinking Guidelines

A set of principles aimed at encouraging individuals to rigorously question and evaluate ideas logically before accepting them as true.

Emotional Reasoning

A cognitive process where a person believes something to be true based solely on their feelings, rather than facts or evidence.

Examine The Evidence

The process of carefully reviewing and analyzing information or data to draw conclusions or make decisions.