Costs of Bankruptcy Woods Construction Corp. has no debt and expects to earn annual NOP of $$6,400,000$ indefinitely. Woods has a required return on assets of $12\%,$ a corporate tax rate of $21\%,$ and there are no taxes on dividends or interest

at the personal level. In any year, there is a $10\%$ chance that Woods will go bankrupt. If bankruptcy occurs it will result in $$12,000,000$ worth of direct and indirect costs that would be discounted at the required return for assets.

a$.$ What is the present value of expected bankruptcy costs for Woods?

b$.$ What is the firm value for Woods?

c$.$ What is the revised firm value for Woods if its shareholders face a $32\%$ personal tax rate on stock$-$related income?