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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