Question: ABC Corp. is a clothing retailer with a current share price of $ 1 0 . 0 0 and with 2 5 million shares outstanding

ABC Corp. is a clothing retailer with a current share price of $10.00 and with 25 million shares outstanding and no debt. ABC announces plans to change its capital structure by borrowing $100 million, and using the proceeds to repurchase shares. ABC has a corporate tax rate of 35%. Calculate the value of the Equity of ABC after the restructure. If the value of Equity after the restructure is actually $170 million instead of the value you calculated, what is the present value of financial distress costs for ABC?

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