The Change in fiRm Value in the Presence of Corporate

question 18

Multiple Choice

The change in firm value in the presence of corporate taxes only is:

• A)positive as equityholders face a lower effective tax rate.
• B)positive as equityholders gain the tax shield on the debt interest.
• C)negative because of the increased risk of default and fewer shares outstanding.
• D)negative because of a reduction of equity outstanding.
• E)None of the above.

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Definitions:

Dorsiflexion

The action of raising the foot upwards towards the shin, decreasing the angle between the dorsum (top) of the foot and the leg.

Psoas Major

A large skeletal muscle that runs from the lumbar region of the vertebral column to the femur and is involved in flexing the hip joint and bending the spine.

Iliopsoas

The iliopsoas is a major muscle group consisting of the iliacus and psoas major muscles, important for flexing the hip.

Hamstring Group

A group of three muscles at the back of the thigh that are involved in bending the knee and extending the hip.