The Value of a Corporation in a Levered Buyout Is

question 12

Multiple Choice

The value of a corporation in a levered buyout is composed of which following four parts:

• A)unlevered cash flows and interest tax shields during the debt paydown period, unlevered terminal value, and asset sales.
• B)unlevered cash flows and interest tax shields during the debt paydown period, unlevered terminal value and interest tax shields after the paydown period.
• C)levered cash flows and interest tax shields during the debt paydown period, levered terminal value and interest tax shields after the paydown period.
• D)levered cash flows and interest tax shields during the debt paydown period, unlevered terminal value and interest tax shields after the paydown period.
• E)asset sales, unlevered cash flows during the paydown period, interest tax shields and unlevered terminal value.

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Definitions:

Present Value

The present value of a future amount of money or a series of cash flows, calculated using a predetermined rate of return.

$1

Symbolizes a unit of currency, typically referring to one dollar in jurisdictions using dollar-denominated currencies.

Future Value

The estimated future worth of a current asset on a given date, projected by assuming a specific growth rate over a period.

Interest Rate

A fee that's calculated as a proportion of the principal sum and is required by the lender from the borrower for lending money or assets.