Business, 16.11.2020 18:10, hugbug2554

Pacific Inc. has EBIT of $50m per year in perpetuity. The cost of capital of unlevered firm is 10%. Pacific's current market values of debt and equity are $100mm and $260mm respectively. Its corporate tax rate is 30%. What is the decrease in the firm's value due to expected financial distress costs?

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Pacific Inc. has EBIT of $50m per year in perpetuity. The cost of capital of unlevered firm is 10%....