Which of the following statement is incorrect? The costs such as legal expenses, associated with corporate default is called indirect bankruptcy costs The lose sales, interrupted operations, and lose valuable employees when the company is busy trying to avoid bankruptcy is considered as indirect bankruptcy costs. Firms that experience financial distress do not necessarily file for bankruptcy. A company has to weigh between the expected bankruptcy cost and the tax benefit of debt when making their capital structure decisions. Expected bankruptcy cost increases as a company takes on more debt