Interior Design Group is an all equity firm that has 40,000 shares of stock outstanding. The company has decided to borrow $1 million to buy out the shares of a deceased stockholder who holds 2,500 shares.

What is the total value of this firm if you ignore taxes?

A. $15.5 million

B. $15.6 million

C. $16.0 million

D. $16.8 million

E. $17.2 million

The total value of this firm if you ignore taxes is $16 million.

Explanation:

Considering that the company has decided to borrow $1 million to buy out the shares of a deceased stockholder who holds 2,500 shares, hence to calculate the total value of the firm we have to first make the following calculation:

$1,000,000:2,500 = 400

Hence, Total value of the firm = 400*40,000 shares of stock outstanding

= $16 million is the total value of this firm if you ignore taxes.