7. MM's Proposition corrected for the inclusion of corporate Income taxes is expressed as: | B. C. D. W = V VL - VU+D(1 - TC) VL = VU+ (TC)(D) VU=VL +(TC)(D) 8. In Miller's model, when the quantity (1 - TC)(1 - TpE) = (1 - Tp), then: C. D. the firm should hold no debt the value of the levered firm is greater than the value of the unlevered firm the tax shield on debt is exactly offset by higher personal taxes paid on interest income the firm should be financed by 100% equity 9. Suppose that your firm's current unlevered value is $800,000, and its marginal corporate tax rate is 35%. Also, you model the firm's PV of financial distress as a function of its debt ratio (DN) according to the relation: PV of financial distress = 800,000 X (D/V]2. What is the firm's levered value if it issues $200,000 of perpetual debt to buy back stock? A. B. C. $820,000. $869,555. $920,000. $350,000 10. Which of the following entities likely has the highest cost of financial distress? A pharmaceuticals development company A downtown bayfront hotel A yacht leasing company A real estate investment trust D. 11. Which of the following statements regarding financial distress is (are) true? 1) Firms in financial distress always end up in bankruptcy. II) Firms can postpone bankruptcy for many years. III) Ultimately, the firm may recover from financial distress and avoid bankruptcy altogether. I only I and II only ll and Ill only