Thompson & Thomson Is an All Equity Firm That Has

Multiple Choice

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 if you ignore taxes?

A) $20.0 million
B) $20.8 million
C) $21.0 million
D) $21.2 million
E) $21.3 million