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

question 35

Multiple Choice

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

• A)$8
• B)$18
• C)$78
• D)$90

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Definitions:

Composite Score

An overall score that combines multiple individual metrics or scores to provide a summary measure.

Waste Management

The collection, transport, processing, recycling or disposal, and monitoring of waste materials to reduce their effect on health, the environment or aesthetics.

Holding Cost

The expense associated with maintaining inventory, including storage, insurance, depreciation, and opportunity costs, among others.

Shipping Cost

The charges incurred for transporting goods through different modes of transportation such as air, sea, or land.