Calculate Stock Value With Modigliani & Miller Model

Question

You own 25% of Unique Vacations, Inc. You have decided to retire and want to sell your shares in this closely held, all equity firm. The other shareholders have agreed to have the firm borrow \$1.5 million to purchase your 1,000 shares of stock.

What is the total value of this firm today under Modigliani & Miller (M&M) theorem if you
ignore taxes?

A. \$4.8 million
B. \$5.1 million
C. \$5.4 million
D. \$5.7 million
E. \$6.0 million
F. None of the above

Summary

The question belongs to Finance and it discusses about calculation of the total value of shares of stock of a firm under the Modigliani & Miller Model or theorem where taxes are ignored.

Total Word Count 119

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