Question: Please provide the solving process and keep 3 decimals of the answer. Bonzai Tree Company has 15M shares in an all-equity firm, at a price

Please provide the solving process and keep 3 decimals of the answer.

Please provide the solving process and keep 3 decimals of the answer.

Bonzai Tree Company has 15M shares in an all-equity firm, at a price of $13 per share. The firm announced that they will borrow $100M to buy back shares (using the full amount of debt). They will keep this debt permanently. Upon announcement the share price increases to $16 per share. The corporate tax rate is 25%, taxes and financial distress costs are the only relevant market imperfections. What is the present value of the financial distress costs - PV (FDC)? Bonzai Tree Company has 15M shares in an all-equity firm, at a price of $13 per share. The firm announced that they will borrow $100M to buy back shares (using the full amount of debt). They will keep this debt permanently. Upon announcement the share price increases to $16 per share. The corporate tax rate is 25%, taxes and financial distress costs are the only relevant market imperfections. What is the present value of the financial distress costs - PV (FDC)

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