Charisma Inc., has debt outstanding with a face value of $4.5million. The value of the firm if it were entirely financed byequity would be $18.3 million. The company also has 340,000 sharesof stock outstanding that sell at a price of $41 per share. Thecorporate tax rate is 21 percent. What is the decrease in the valueof the company due to expected bankruptcy costs?
