An Unlevered Firm Currently Has a Value of $100 Million

question 49

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.What is the value of the levered firm if it goes ahead with this plan?

• A)$115 million
• B)$100 million
• C)$50 million
• D)$150 million
• E)$85 million

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Definitions:

Asymmetrical

Lacking symmetry; not identical on both sides of a central line.

Unimodal

Unimodal refers to a distribution or dataset that has only one mode or peak, representing the most frequent value.

Salary Negotiations

The process in which an individual discusses their remuneration with an employer, aiming to reach a mutually satisfactory pay.

Symmetrical

Refers to a balanced shape on either side of a central axis, where both halves of a dataset or object are mirror images of each other.