Given the Following Information for a Levered and Unlevered Firm,calculate

question 28

Multiple Choice

Given the following information for a levered and unlevered firm,calculate the difference in the cash flow available to investors. $$\begin{array}{l}\begin{array} { l r r } &\text { Levered} &\text { Unlevered }\\\text { Revenue } & \$ 250 & \$ 250 \\\text { Operating cost } & - \$ 100 & - \$ 100 \\\text { Interest expense } & - \$ 20 & \$ 0\end{array}\end{array}$$ Assume the corporate tax rate is 40%. (Hint: Calculate the tax savings arising from the tax deductibility of interest payments) .

• A) 8
• B) 18
• C) 78
• D) 90

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Definitions:

Dermis

The thick layer of living tissue below the epidermis that forms the true skin, housing sweat glands, hair follicles, and blood vessels.

Epidermis

The outer layer of cells covering an organism, particularly the surface epithelium of the skin of animals.

Stratum

A layer or level within a hierarchical structure, such as the layers of the skin or atmosphere.

Epidermis

The epidermis is the outermost layer of skin, providing a waterproof barrier and creating our skin tone.