The current total value of the firm is

Question

Quizplus · Accepted Answer

To get the current total value of the firm, we need to add the total assets ($7,250,000) and subtract the total liabilities ($500,000). This gives us a total of $6,750,000. However, we're told that the firm also has 10% of its assets as cash, which is $725,000 ($7,250,000 x 0.1). Adding this to our total gives us $7,475,000. But we're told that the firm also has a $725,000 outstanding loan, which we need to subtract. This gives us a final total value of $6,750,000 - $725,000 = $5,750,000. Therefore, the correct choice is B.

The Current Total Value of the Firm Is