The consultant looked at the confused faces all around him, especially the concerned look on the chief executive officer’s face, and slowly began his address:
“I know that all of you are wondering what really happened here. Should the value of the firm have gone up by more than $20 million because of all the equity created here? Or is it that the net value created is just $20 million and there is actually less credit to go around than is being claimed? You would perhaps also wonder about where the credit really belongs if the second scenario is indeed true. In reality, where did we really create the equity? All of these are fair questions, and I will try to answer them as best as I can.
“Let me begin with the bad news. The total equity ...
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