Zero-tax model-what is the value of levered firm

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1. Which of the statements below is TRUE?

A.The profits for common stock owners come after payment to the employees, suppliers, government, and creditors.

B.Stock is a minor financing source for public companies.

C.Shareholders elect the board of directors, which ultimately selects the bondholder team that runs the dayminustominusday operations of the company.

D.Stockholders are paid before debt holders (bondholders) if a company fails.

2. An unlevered firm has a value of $575 million. An otherwise identical but levered firm has $175 million in debt. Under the MM zero-tax model, what is the value of the levered firm? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000.

Reference no: EM132049659

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