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
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
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 + |
|
$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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