Dragula, Inc., has debt outstanding with a face value of $3.8 million. The value of the firm
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Dragula, Inc., has debt outstanding with a face value of $3.8 million. The value of the firm if it were entirely financed by equity would be $12.3 million. The company also has 245,000 shares of stock outstanding that sell at a price of $38 per share. The corporate tax rate is 35 percent. What is the decrease in the value of the company due to expected bankruptcy costs?
Face ValueFace value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
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Input Area Market value of debt 3800000 V U 12...View the full answer
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Related Book For 
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
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