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Memphic Memphic
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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 $140 million face value due next year.  Calculate the value of levered equity, the value of debt, and the total value of MI with leverage.
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
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6 years ago
VL =   = $19.37 million

Vdebt =   = $114.29 million

Total Value = VL + Vdebt = $19.37 + $114.29 = $133.66 million
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