13. Consider the followingformula: VL = VU + tau cD The term tau cD represents:...
13. Consider the followingformula:
VL
=
VU
+
tau
cD
The term
tau
cD
represents:
A.
the present value of the interest tax shield.
B.
the interest tax shield each year.
C.
the value of the firm with leverage.
D.
the preset value of the future interest payments.
Homework Answers
Option (A) is correct.
VL = VU + tau cD
here, VL is the value of the levered firm
VU is the value of the unlevered firm
and, tau cD is the present value of the interest tax shield.
Add Answer to:
13. Consider the followingformula:
VL
=
VU
+
tau
cD
The term
tau
cD
represents:...
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