When Financial Distress Is a Possibility, the Value of a Levered

question 46

Multiple Choice

When financial distress is a possibility, the value of a levered firm is a function of the

• A)value of the firm if all-equity-financed.
• B)value of the firm if all-equity-financed plus the present value of tax shield.
• C)value of the firm if all-equity-financed plus the present value of tax shield minus the present value of costs of financial distress.
• D)value of the firm if all-equity-financed plus the present value of tax shield minus the present value of costs of financial distress minus the present value of omitted dividend payments.

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