The Change in Firm Value in the Presence of Corporate

question 35

Multiple Choice

The change in firm value in the presence of corporate taxes only is:

• A)positive as equity holders face a lower effective tax rate.
• B)negative as equity holders gain the tax shield on the debt interest.
• C)negative because of the increased risk of default and fewer shares outstanding.
• D)negative because of a reduction of equity outstanding.
• E)None of the above.

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Definitions:

Real GDP Per Person

An economic metric that divides a country's real gross domestic product by its total population, reflecting the average economic output per person, adjusted for price changes.

Sub-Saharan Africa

A geographic area of the African continent that is situated south of the Sahara Desert, characterized by diverse cultures, languages, and ecosystems.

Real GDP Per Person

Real GDP Per Person is a measure of the economic output of a country divided by its population, adjusted for inflation; it’s often used as an indicator of the average standard of living.

Rich Countries

Nations with high levels of income per capita, often characterized by strong economies, advanced infrastructure, and a high standard of living.