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King, Incorporated, has debt outstanding with a face value of $4.3 million. The value of the firm if it were entirely financed by equity would
King, Incorporated, has debt outstanding with a face value of $4.3 million. The value of the firm if it were entirely financed by equity would be $17.9 million. The company also has 320,000 shares of stock outstanding that sell at a price of $44 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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