Problem 16-23 Bankruptcy (LO5)

A petition for the reorganization of the Boniface Company has been filed under the Insolvency Act. The trustees estimate the firm's liquidation value, after considering costs, is $117 million. Alternatively, the trustees, using the analysis of the Zulu Consulting firm, predict that the reorganized business will generate $20 million annual cash flows in perpetuity. The discount rate is 15%.

Calculate the present value if the company is alive. (Enter the answer in millions. Round the final answer to 2 decimal places. Omit $ sign in your response.)

PV $

Should Boniface be liquidated or reorganized?

multiple choice

• Boniface should be liquidated.

• Boniface should be reorganized.