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stranahan stranahan
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7 years ago
Consider the Modigliani and Miller world of corporate taxes. An unleveraged (all-equity) firm value is $100 million. By adding debt, the annual interest expense is $10 million, the corporate tax rate is 40%, and the discount rate on the tax shield is 10%. What is the gain to leverage or the value added from issuing debt?
A) $140 million
B) $100 million
C) $160 million
D) $120 million
Textbook 
Financial Management: Core Concepts

Financial Management: Core Concepts


Edition: 2nd
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portalgoal!portalgoal!
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7 years ago
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stranahan Author
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7 years ago
Thank you very much for this. It's really helpful.
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