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?

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

CASE A   CASE B
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)

Our writing company helps you enjoy campus life. We have committed and experienced tutors and academic writers who have a keen eye in writing papers related to Business, Management, Marketing, History, English, Media studies, Literature, nursing, Finance, Medicine, Archaeology, Accounting, Statistics, Technology, Arts, Religion, Economics, Law, Psychology, Biology, Philosophy, Sociology, Political science, Mathematics, Engineering, Ecology etc.

Need Custom Written Paper?

-Plagiarism free

-Timely delivery