Consider a Firm Whose Capital Structure Includes Both Debt and Equity.If

question 47

Multiple Choice

Consider a firm whose capital structure includes both debt and equity.If the firm must pay taxes in a given year,which of the following has the highest value?

• A)The value of the unlevered firm.
• B)The value of the levered firm.
• C)The value of the firm's debt.
• D)The value of the firm's equity.
• E)The value of the interest tax shield.

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Definitions:

Laissez-faire

An economic philosophy of free-market capitalism that opposes government intervention.

Democratic

Pertaining to a form of government in which power is vested in the hands of the people, directly or through elected representatives.

Class Inequality

Disparities in access to resources, opportunities, and privileges among different social classes within a society, often stemming from economic disparities.

Horticultural Societies

Those in which people domesticate plants and use simple hand tools to garden. Such societies first emerged about 10,000 years ago. Horticulture increases the food supply and makes it more dependable. This increases average settlement size and permanence, the division of labor, productivity, and inequality above the levels typical of foraging societies.