Hominy, Inc., has debt outstanding with a face value of $2.15 million. The value of the firm

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Hominy, Inc., has debt outstanding with a face value of $2.15 million. The value of the firm if it were entirely financed by equity would be $11.4 million. The company also has 195,000 shares of stock outstanding that sell at a price of $47 per share. The corporate tax rate is 21 percent. What is the decrease in the value of the company due to expected bankruptcy costs?

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Corporate Finance Core Principles And Applications

ISBN: 9781260571127

6th Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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