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johnpaech johnpaech
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Posts: 1098
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6 years ago
Which of the following statements is FALSE?
A) Once investors know the recap will occur, the share price will rise immediately to a level that reflects the value of the interest tax shield that the firm will receive from its recapitalization.
B) When securities are fairly priced, the original shareholders of a firm capture the full benefit of the interest tax shield from an increase in leverage.
C) In the presence of corporate taxes, we do not include the interest tax shield as one of the firm's assets on its market value balance sheet.
D) We can analyze the recapitalization using the market value balance sheet; it states that the total market value of a firm's securities must equal the total market value of the firm's assets.
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
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wrote...
6 years ago
C
Explanation:  C) In the presence of corporate taxes, we include the interest tax shield as one of the firm's assets on its market value balance sheet.
johnpaech Author
wrote...
5 years ago
Really appreciate the help
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