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A firm will be worth either $8000 or $30000 with equal probabilities in one year. The firm has the following capital structure: Equity Stocks: 1000

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A firm will be worth either $8000 or $30000 with equal probabilities in one year. The firm has the following capital structure: Equity Stocks: 1000 outstanding shares. Debt Bonds: Face value is $10000 due in one year. 6% You are also given the following information: Equity cost of capital Debt cost of capital 3% Bankruptcy costs $2000 The present value of financial distress costs is calculated at the debt cost of capital. Determine the firm's market value, A 15000 B 17000 c 19000 D 21000 E 23000

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