Question: Given the following information, leverage will add how much value to an unlevered firm per dollar of debt ? (Approximately) Corporate tax rate: 34% Personal

Given the following information, leverage will add how much value to an unlevered firm per dollar of debt? (Approximately)

Corporate tax rate: 34%

Personal tax rate on income from bonds: 30%

Personal tax rate on income from stocks: 20%

[Note: This question requires some thought. Consider how money passes from the firm to investors. Do not simply apply the relative advantage formula here, as it yields a percentage, not an actual dollar amount.]

Options for answers:

1. $0.172
2. $0.66
3. -$0.66
4. -$0.34
5. $0.39
6. $0.59

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