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Using M&M Model Calculate Value Of Firm


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 under M&M if you ignore taxes? 

A. $20.0 million
B. $20.8 million
C. $21.0 million
D. $21.2 million
E. $21.3 million
F. None of the above


The question belongs to Finance and it discusses about calculation of the value of a firm with M&M model ignoring taxes where the firm has a 500,000 shares outstanding and it is borrowing $8 million at 9% interest rate to repurchase 200,000 shares from the outstanding stock.

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