The present value of bankruptcy costs

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Reference no: EM131450497

Magnum Enterprises has net operating income of $4 million. There is $50 million of debt outstanding with a required rate of return of 7%. The required rate of return on the industry is 11%. The corporate tax rate is 35%; there are corporate taxes, but no personal taxes.

1. Compute the value of Magnum assuming that the present value of bankruptcy costs is $11 million. Round your answer to nearest whole dollar. $

Reference no: EM131450497

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