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Problem regarding the expected bankruptcy costs

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Dragula, Inc., has debt outstanding with a face value of $5 million. The value of the firm if it were entirely financed by equity would be $18 million. The company also has 390,000 shares of stock outstanding that sell at a price of $37 per share. The corporate tax rate is 35 percent. What is the decrease in the value of the company due to expected bankruptcy costs? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Reference no: EM131473418

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