Finance HW

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:  $14,450,000
Number of shares outstanding: 250,000
Current price per share:  $38.00
Tax rate:  35 %


What is the decrease in firm value due to expected bankruptcy costs?

Save your time - order a paper!

Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines

Order Paper Now


Lindbergh Company has the following date related to its capital structure:

EBIT (in perpetuity): $175,000   EBIT (in perpetuity): $175,000
Rate on debt: 4.0 %   Rate on debt: 4.0 %
Cost of Equity: 13.0%   Cost of Equity: 13.0%
Tax Rate: 35.0%   Tax Rate: 35.0%
Debt: 0   Debt: Borrow $135,000 to buy share
        Will have debt in perpetuity

What is the value of unlevered firm (Case A) and the levered firm (Case B)

Do you have a similar assignment? Make your order now and get a 15% discount. Use discount code "Newclient".