Simpson's Is an All Equity Firm That Has 400,000 Shares

question 50

Multiple Choice

Simpson's is an all equity firm that has 400,000 shares of stock outstanding.The company is in the process of borrowing $1.2 million at 8 percent interest to repurchase 50,000 shares of the firm's outstanding stock.What is the value of this firm if you ignore taxes?

• A)$8.4 million
• B)$9.2 million
• C)$9.6 million
• D)$9.8 million
• E)$8.9 million