p5 In a world with taxes, the value of a leveraged firm equals the value of an unleveraged firm plus: the present value of its debt. the present value of the interest tax shield. the present value of its future cash flows. none of the above.

p5 In a world with taxes, the value of a leveraged firm equals the value of an unleveraged firm plus: the present value of its debt. the present value of the interest tax shield. the present value of its future cash flows. none of the above.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

In a world with taxes, the value of a leveraged firm equals the value of an unleveraged firm plus:

the present value of its debt.

the present value of the interest tax shield.

the present value of its future cash flows.

none of the above.

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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