Ask Question
BusinessBusiness
10 December, 02:35

Which of the following expresses the value of a levered firm (VL) in the Static Tradeoff model of optimal capital structure [Note: VU denotes the value of the unlevered firm; CFD denotes expected costs of financial distress; and PV denotes present value.]

A. VL = PV (Tax Shield) - PV (CFD)

B. VL = VU + PV (Tax Shield) / PV (CFD)

C. VL = VU + PV (Tax Shield) - PV (CFD)

D. VL = VU + PV (Tax Shield)

+4
Answers (1)
  1. 10 December, 02:44
    0
    C. VL = VU + PV (Tax Shield) - PV (CFD)

    Explanation:

    The static trade off theory is a theory of capital structure in corporate finance, first proposed by Alan Kraus and Robert H. Litzenberger. The theory emphasizes the trade-offs between the tax benefits of increasing leverage and the cost of bankruptcy associated with higher leverage. The answer is C as we know relative to the unleveraged firm, leverage provides both costs and benefits. The benefits are the tax shields provided by debt.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Which of the following expresses the value of a levered firm (VL) in the Static Tradeoff model of optimal capital structure [Note: VU ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
By what methods are your household's scarce resources allocated? identify those allocated by market price; by command; by first-come, first-served; and by equal shares. are any resources allocated by majority vote?
Answers (1)
The analysis of the behavior of individual decision-making units is the definition of A) microeconomics. B) positive economics. C) macroeconomics. D) normative economics.
Answers (2)
Jerome uses the formula, P = 2DB, to find his approximate six-month premium when his driver risk factor, D, is 1.02 and the basic six-month premium is $500. What will his monthly premium be?
Answers (1)
Jamal recently purchased a cooperative's stock and moved into one of the cooperative's units. what type of lease does jamal have with the cooperative corporation?
Answers (1)
Which of the following is NOT a type of savings account? A) certificate of deposit B) savings bond C) basic savings D) stock marketing savings
Answers (1)
New Questions in Business
Scott Company had sales of $12,050,000 and related cost of goods sold of $7,100,000 for the year ending December 31, 20Y8. Scott provides customers a refund for any returned or damaged merchandise.
Answers (1)
Bill and sally kaplan have an annual spending plan that amounts to $104,000. if inflation is 4 percent a year for the next three years, what amount will the kaplans need for their living expenses three years from now?
Answers (1)
Which of the following describes the process whose ultimate result is Illustrated by the multiplier (the result being that gross domestic product (GDP) Increases by more than an initial increase in spending by Individuals, firms, or the government) ?
Answers (1)
On the first day of the fiscal year, a company issues a $5,000,000, 7%, five-year bond that pays semiannual interest of $175,000 ($5,000,000 * 7% * ½), receiving cash of $5,400,000.
Answers (1)
You have been placed in charge of all advertising for a product that has common appeal in different cultures around the world. You will most likely engage in a. global advertising. b. international advertising. c. national advertising. d.
Answers (1)
Home » Business » Which of the following expresses the value of a levered firm (VL) in the Static Tradeoff model of optimal capital structure [Note: VU denotes the value of the unlevered firm; CFD denotes expected costs of financial distress;
Sign Up Forgot Password?