When financial distress is a possibility, the value of a levered firm is a function of the
A) value of the firm if all-equity-financed.
B) value of the firm if all-equity-financed plus the present value of tax shield.
C) value of the firm if all-equity-financed plus the present value of tax shield minus the present value of costs of financial distress.
D) value of the firm if all-equity-financed plus the present value of tax shield minus the present value of costs of financial distress minus the present value of omitted dividend payments.
Correct Answer:
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