Nonmarketed Claims Dream, Inc., has debt outstanding with a face value of $4 million. The value of
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Nonmarketed Claims Dream, Inc., has debt outstanding with a face value of $4 million.
The value of the firm if it were entirely financed by equity would be $12 million. The company also has 250,000 shares of stock outstanding that sell at a price of $35 per share. The corporate tax rate is 35 percent. What is the decrease in the value of the company due to expected bankruptcy costs? LO.1
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