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: 35 %
What is the decrease in firm value due to expected bankruptcy costs?
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Foundations Of Financial Markets And Institutions
Authors: Franco Modigliani, Frank J. Jones, Michael G. Ferri, Frank J. Fabozzi
3rd Edition
0130180793, 978-0130180797
