Suppose That Your Firm's Current Unlevered Value, V*, Is $800,000

question 44

Multiple Choice

Suppose that your firm's current unlevered value, V*, is $800,000, and its marginal corporate tax rate is 35 percent.Also, you model the firm's PV of financial distress as a function of its debt level according to the relation: PV of financial distress = 800,000 × (D/V*) 2.What is the firm's levered value if it issues $200,000 of perpetual debt to buy back stock?

• A)$820,000.
• B)$869,555.
• C)$920,000.
• D)$350,000.

---

Definitions:

Nystatin

An antifungal medication used to treat fungal infections in the mouth, throat, and other parts of the body.

Oral Candidiasis

A fungal infection in the mouth caused by Candida species, characterized by white patches on the tongue and inside the cheeks.

Swish and Swallow

A method of administering liquid medication, whereby the patient swishes the medication around the mouth and then swallows it, often used for oral thrush or sore throat treatments.

Vitamin B

A group of water-soluble vitamins that play important roles in cell metabolism and energy production.