An Unlevered Firm Currently Has a Value of $40 Million

question 33

Multiple Choice

An unlevered firm currently has a value of $40 million.The firm has a tax rate of 40%.The firm wishes to replace $10 million of its equity with $10 million of permanent debt.What is the value of the levered firm if it goes ahead with this plan?

• A)$42 million
• B)$50 million
• C)$40 million
• D)$44 million
• E)$45 million

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Definitions:

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