The value of the firm to the shareholders if the firm owes $230 to its debtholders is $12.40.
A firm value, also known as enterprise value (EV). It is a financial concept that reflects the value of a company. This is the value that the company earns on a particular day. In theory, this is the amount to be paid to buy/take over a business entity. Like property, the value of a business can be determined either by book value or market value. But it usually refers to the market value of the company. EV is a more comprehensive substitute for market value and can be calculated using more than one approach.
The value of a company is essentially the sum of the claims of its creditors and shareholders. Therefore, one of the easiest ways to measure this is to add the market value of your debt, equity and minority investment.
Therefore,
Value in boom (HV) = $390
Value otherwise (LV) = $185
Probability of boom (PB) = 28%
Other probability (PL) = 100%-28% = 72%
Debt amount (D) = $230
Value of the firm = ((VH*PB)+(VL*PL))-D
= (390X 0.28)+(185X0.72)-230
= $12.40
To learn more about value of the firm, refer:
https://brainly.com/question/15719040
#SPJ1
Answer: $44.80
Explanation:
Shareholder value = .28MAX[($390 − 230),0] + (1 − .28)MAX[($185 − 230),0]
Shareholder value = $44.80
