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:

Office Supplies

Consumable items used in offices for daily operations, such as paper, pens, and staplers, distinct from longer-term assets.

Accounts Payable

Liabilities of a company representing money owed to creditors for goods and services purchased on credit.

Cash

The most liquid form of financial assets, readily available for transactions or any immediate need.

Common Stock

A type of financial security that represents ownership in a corporation, giving holders a share of the firm's profits and voting rights.