Given the Following Information,leverage Will Add How Much Value to the Unlevered

question 40

Multiple Choice

Given the following information,leverage will add how much value to the unlevered firm per pound of debt?
Corporate tax rate: 34%
Personal tax rate on income from bonds: 10%
Personal tax rate on income from equities: 50%

• A)£-0.050
• B)£-0.188
• C)£0.367
• D)£0.633
• E)None of the above.

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Definitions:

Tax Return

A form or forms filed with a government body reporting income, expenses, and other pertinent tax information, used to calculate tax liability.

Financial Statements

Formal records of the financial activities and condition of a business, person, or other entity, typically including a balance sheet, income statement, and cash flow statement.

Plant Assets

Long-term tangible assets used in the operation of a business and not expected to be consumed or converted into cash in the short term.

Depreciated

The decrease in the value of an asset over time due to wear and tear, age, or obsolescence, typically accounted for on financial statements through depreciation expense.