Assume an Unlevered Firm Changes Its Capital Structure to Include

question 33

Multiple Choice

Assume an unlevered firm changes its capital structure to include $1 million in permanent debt at a 7% interest rate.The tax rate is 35%.According to MM I with taxes,the value of the firm will increase by ____ due to this change in its capital structure.

• A) $35,000
• B) $70,000
• C) $350,000
• D) $700,000

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Definitions:

Gallons

A unit of volume used primarily in the United States to measure liquids.

Whisky Consumption

The act of drinking whisky as a means of enjoyment or recreation.

Gallons

A unit of volume used primarily in the United States to measure liquids and gases.

Utility Function

A mathematical representation of how consumer preferences over goods or services translate into utility or satisfaction levels.