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Prescott 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
Prescott 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: | 30 % |
What is the decrease in firm value due to expected bankruptcy costs? (Show work )
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Intermediate Financial Management
Authors: Eugene F Brigham, Phillip R Daves
14th Edition
0357516664, 978-0357516669
