A company currently has a 100% equity structure. Let the current value of the company be approximated by $CV. Assuming corporate taxes exist but personal taxes do not, select the following option that describes the value of the company if the company adds debt to its capital structure.   $CV + future value of tax savings on interest   $CV + future value of interest savings on tax   $CV + present value of tax savings on interest   $CV + present value of interest savings on tax

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 2P
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A company currently has a 100% equity structure. Let the current value of the company be approximated by $CV. Assuming corporate taxes exist but personal taxes do not, select the following option that describes the value of the company if the company adds debt to its capital structure.

  $CV + future value of tax savings on interest
  $CV + future value of interest savings on tax
  $CV + present value of tax savings on interest
  $CV + present value of interest savings on tax
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