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What is the formula for calculating the value of a levered firm (VL) according to the text?

Name: Fundamentals of Corporate Finance
Author: ROSS
ISBN: 978-1-265-55360-9

The formula for calculating the value of a levered firm (VL) is VL = VU + TC × D, where VU is the value of the firm if it has no debt, TC is the corporate tax rate, and D is the amount of debt.

Key points

VL represents the value of a levered firm.
VU is the value of an unlevered firm.
TC is the corporate tax rate affecting the value of the firm with debt.
D is the total debt of the firm.

Source:Fundamentals of Corporate Finance· Financial Leverage and Capital Structure Policy· p. 590–625

What is the formula for calculating the value of a levered firm (VL) according to the text?

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