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In the same NI illustration, Value of the firm V is:
A₹18,75,000
B₹20,00,000
C₹40,00,000
D₹38,75,000
Answer & Solution
Correct answer: D. ₹38,75,000
1. V = S + D where D = market value of debt = ₹20,00,000.
2. V = 18,75,000 + 20,00,000.
3. Result = ₹38,75,000.
_Source: ICAI BoS CA Inter Paper 6A, Ch 5 "Financing Decisions — Capital Structure", §2.1_