In the coordinate below, please draw and indicate on the diagram:

(i) the value of a levered firm in a pure world;

(ii) the value of a levered firm in a world where everything is pure except that there is corporate tax;

(iii) the value of a levered firm in a world where everything is pure except that there are corporate tax and costs of financial distress;

(iv) the present value of the financial distress costs;

(v) total present value of annual tax shield.

(Note: A pure world is a hypothetical world where there are no taxes, no financial distress cost, no asymmetric information, and no agency cost. Security markets are assumed to be efficient and stock prices follow random walk.)

This is a corporate finance question that is concentrating on capital restructuring and the M&M Model

Value of the firm Debt Value of the firm Debt