lvanover6851 lvanover6851

19-12-2022
Business

Answered

Suppose the corporate tax rate is 40%. Consider a firm that earns $1000 before interest and taxes each year with no risk. The risk free rate is 5%.A) Suppose the firm has no debt and pays out its net income as a dividend each year. What is the value of the unlevered firm?B) Suppose instead the firm makes interest payments of $500 per year, i.e adds debt. What is the difference between the total value of the firm with leverage and without leverage? Please show your work for both A and B

Answer :

Other Questions

(T/F) labor services provided by the firm's owner without reimbursement to the owner are a good example of an implicit cost of business for a firm.

A perfectly competitive firm currently sells 30,000 cartons of eggs at $0.50 each. If the firm wants to sell one more carton of eggs, the firm a. Should raise i

A firm produces and sells three different versions of a handheld toy computer. All three are identical except for the software loaded, as each version has a dif

your firm has decided to tailor its products and services to meet local market demands. a good approach to use would be ___segmentation

A purely competitive firm whose goal is to maximize profit will choose to produce the amount of output at which

Under the assumptions of the Fisher effect and monetary neutrality, if the money supply growth rate falls, then A. both the nominal and the real interest rate f

Circuit Masters, Inc. (CMI), is presently operating at 80% of capacity and manufacturing 123,000 units of a patented electronic component. The cost structure of

from where does the analyst obtain the forecast of the repayment of current maturities of long-term debt

Debt investments generally earn lower returns compared to equity investments such as stocks. this is because debt investments ____ equities. - have equivalent r

If the market demand for a good is inelastic and the supply is elastic, which of the following is true when there is an increase in sales tax?