What is the value of the firm

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Reference no: EM132746716

Problem - Suppose that with the $49,000 of debt and no costs to financial distress the firm has a value of $198,957.5. Suppose, in addition:

1) The debt issue raises the possibility of bankruptcy.

2) The firm has a 20% chance of going bankrupt after 3 years.

3) If it goes bankrupt, it will incur bankruptcy costs of 70,000.

4) The discount rate is 16%.

Required - What is the value of the firm? Enter your answer rounded to two decimal places.

Reference no: EM132746716

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