Reese inc has debt outstanding with a face value of 7, Ask an Expert

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Reese, Inc., has debt outstanding with a face value of $7 million. The value of the firm if it were entirely financed by equity would be $19.75 million. The company also has 350,000 shares of stock outstanding that sell at a price of $40 per share.

The corporate tax rate is 35 percent. What is the decrease in the value of the company due to expected bankruptcy costs?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92710030

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