You own 30% of Westcoast,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 $2 million to purchase your 2,000 shares of stock. What is the total value of this firm today if you ignore taxes?
A) $4.58 million
B) $5.08 million
C) $5.40 million
D) $5.76 million
E) $6.67 million

Question

Quizplus · Accepted Answer

The firm is borrowing $2 million to buy 30% of the shares, implying that 30% of the firm is worth $2 million. Therefore, the total value of the firm is $2 million / 0.30 = $6.67 million.

You Own 30% of Westcoast,Inc