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Lindburgh Inc. has the following data regarding its financial structure: Market value of outstanding debt: $7,000,000 Value of firm if financed with all equity: $18,850,000
Lindburgh Inc. has the following data regarding its financial structure:
| Market value of outstanding debt: | $7,000,000 |
| Value of firm if financed with all equity: | $18,850,000 |
| Number of shares outstanding: | 350,000 |
| Current price per share: | $38.00 |
| Tax rate: | 35 % |
What is the decrease in firm value due to expected bankruptcy costs?
Answer choices:
| $1,000,000 |
| $5,550,000 |
| $2,450,000 |
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Handbook Of Research Methods And Applications In Empirical Finance
Authors: Adrian R. Bell, Chris Brooks, Marcel Prokopczuk
1st Edition
1782540172, 978-1782540175
