An Unlevered Firm Currently Has a Value of $100 Million

question 37

Multiple Choice

An unlevered firm currently has a value of $100 million.The firm has a tax rate of 30%.The firm wishes to replace $50 million of its equity with $50 million of permanent debt.By increasing its leverage,the PV of the expected costs of financial distress would rise from 0 to $10 million.What is the value of the levered firm if it goes ahead with this plan?

• A)$105 million
• B)$115 million
• C)$100 million
• D)$125 million
• E)$110 million

Understand the legal implications of actions taken by members or managers in a member-managed LLC.

Recognize different shareholder voting rights and mechanisms within a corporation.

Identify the responsibilities and liabilities of corporate managers and directors under the duty of care, loyalty, and obedience.

Comprehend the impact of specific laws and trends on corporate listings and governance in the U.S.

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Definitions:

CD

A compact disc, a digital optical disc data storage format used for storing digital data.

DD

A commonly used abbreviation with multiple meanings, contextually dependent, such as "Due Diligence" in finance or "Double Density" in computing storage.

Simp

A slang term often used derogatorily to describe a person who shows excessive sympathy or attention towards another person, sometimes in pursuit of a romantic relationship, without receiving any affection in return.

Add

To combine one or more numbers or quantities to get a sum or total.