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johnpaech johnpaech
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Posts: 1098
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6 years ago
Assume that in the event of default, 20% of the value of MI's assets will be lost in bankruptcy costs and suppose that MI has zero-coupon debt with a $125 million face value due next year.  The present value of MI's financial distress costs is closest to:
A) $20.0 million
B) $6.6 million
C) $6.3 million
D) $19.0 million
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
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Replies
wrote...
6 years ago
C
Explanation:  C) PV(Financial Distress Costs) =   = $6.349 million
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