Question
Prescott Inc. has the following data regarding its financial structure: Market value of outstanding debt: $2,500,000 Value of firm if financed with all equity: $16,750,000
Prescott Inc. has the following data regarding its financial structure:
| Market value of outstanding debt: | $2,500,000 |
| Value of firm if financed with all equity: | $16,750,000 |
| Number of shares outstanding: | 350,000 |
| Current price per share: | $38.00 |
| Tax rate: | 32 % |
What is the decrease in firm value due to expected bankruptcy costs?
You Answered
$3,450,000
$800,000
$1,750,000
$1,825,000
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Personal Finance
Authors: Jeff Madura, Hardeep Singh Gill
3rd Canadian Edition
978-0133035575, 133035573, 978-0133970524, 133970523, 978-0134040042
