Consider the Pie Models of Corporate Structure

question 80

Multiple Choice

Consider the pie models of corporate structure.What is the difference between the all-equity pie and the levered pie for a firm in the presence of taxes?

• A)The size of the levered pie is smaller than the all-equity pie.
• B)Taxes eat a slice of the levered pie but pass by the all-equity pie.
• C)Both pies are the same size and are sliced identically.
• D)Taxes eat a slice of both pies but take a larger slice of the all-equity pie.
• E)The all-equity pie is smaller in size than the levered pie.

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Definitions:

Market

The institution through which buyers and sellers interact and engage in exchange.

S And D

Stands for Supply and Demand, which are the forces that determine the price of goods and services in a marketplace.

CD-Rom Drives

Hardware devices used for reading data stored on CD-ROMs, typically used for distributing software and storing media in the past.

Tariffs

Taxes on imports or exports between sovereign states, used to control trade, raise government revenue, or protect domestic industries.