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At What Level of Firm Value Will Equity Begin to Receive

Question 1

Multiple Choice

At what level of firm value will equity begin to receive a payoff if the firm consists of equity and a single zero coupon bond with a promised payoff of $100 million?


A) when the value exceeds $50 million
B) when the value exceeds $100 million
C) when the value exceeds $10 million
D) This cannot be answered without knowing the relative percentages of debt and equity financing.

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