The M&M Theory Company Has an Unleveraged Value of $3,250,000,$1,500,000

question 141

Essay

The M&M Theory Company has an unleveraged value of $3,250,000,$1,500,000 in debt,and a corporate tax rate of 34%.In addition,the firm's bankruptcy costs have been estimated at $800,000 and the probability of bankruptcy is 10%,calculate:
A) expected bankruptcy cost
B) Value of the firm

• A) expected bankruptcy cost
• B) Value of the firm

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