Given the Following Information, Leverage Will Add How Much Value

question 33

Multiple Choice

Given the following information, leverage will add how much value to the unlevered firm per pound of debt?
Corporate tax rate: 40%
Personal tax rate on income from bonds: 20%
Personal tax rate on income from shares: 30%

• A)£-0.475
• B)£0.475
• C)£0.525
• D)£0.633
• E)None of the above.

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Definitions:

Net Income

The profit of a company after all expenses, taxes, and costs have been subtracted from total revenue, a key indicator of financial health.

Net Cash Flow

The amount of cash generated or lost by a company in a given period, considering cash inflows and outflows from operating, investing, and financing activities.

Accounts Receivable

The total amount of money owed to a company by its customers for goods or services delivered or used but not yet paid for.

Inventories

Tangible property held for sale in the ordinary course of business, in the process of production for such sale, or to be currently consumed in the production of goods or services.