Basic Finance W9b (MIT)

What is the value of Bavarian Brew before restructuring? Assume no corporate taxes.

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What is the value of Bavarian Brew before restructuring? Assume a corporate tax rate of 30%.

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What is the value of Bavarian Brew after restructuring? Assume no corporate taxes.

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What is the value of Bavarian Brew after restructuring? Assume corporate taxes of 30%.

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What is the present value of Bavarian Brew's debt tax shield after the restructuring? Assume corporate taxes of 30%.

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What is Bavarian Brew's required return on equity before the restructuring? Assume no corporate taxes.

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What is the Bavarian Brew's required return on levered equity after the restructuring?

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The uncertainty caused by the variability of a company's cash flows is called:

• financial risk

• business risk

• financial leverage

• agency cost

Which of the following is considered an indirect cost of bankruptcy?

• Document printing expenses

• Professional fees paid to lawyers

• Loss of key employees

• Travel expenses by board of directors

Which of the following is considered a direct cost of bankruptcy?

• Diversion of management's time

• Constrained capital investment spending

• Lost sales

• Professional fees paid to lawyers