We are working on a Leland model to define the optimal capital structure of a firm (Blaine

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We are working on a Leland model to define the optimal capital structure of a firm (Blaine kitchenware).

Within this model we have to define the bankruptcy costs. If we follow the definition of Altman with around 20%, the costs are too low?

Do you have any suggestions how to argue higher costs? I found out that previously others defined them with 40%, but haven't argued why?

Related Book For answer-question

Intermediate Financial Management

ISBN: 9780357516669

14th Edition

Authors: Eugene F Brigham, Phillip R Daves

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Posted Date: Apr 10, 2023 01:51 AM

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We are working on a Leland model to define the optimal capital structure of a firm (Blaine

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The choice of bankruptcy costs is a critical assumption in any capital structure model including the ... View the full answer

Intermediate Financial Management

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