What Is the Change in Value for a Firm with $1

question 68

Multiple Choice

What is the change in value for a firm with $1 million in equity, $1 million in permanent debt at a 10% interest rate, and a 35% tax rate if MM I is modified to recognize corporate taxes?

• A)value increases by $35,000
• B)value increases by $100,000
• C)value increases by $350,000
• D)value increases by $700,000

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Definitions:

Harmony

A state of agreement, concord, or peaceful relations among individuals or groups.

Roles

The functions or positions that individuals are expected to perform in a specific context or system.

Face

In social psychology, it refers to an individual's sense of prestige, dignity, or social standing in the eyes of others.

Anchoring and Adjustment

A cognitive bias in decision-making where an initial piece of information (the anchor) heavily influences subsequent judgments and adjustments.