Rozanski Co. currently has EBIT of $47,000 and is all equity financed. EBIT is expected to stay at this level indefinitely. The firm pays corporate taxes equal to 37% of taxable income. The cost of equity for this firm is 19%.
Suppose the firm has a value of $155,842.11 when it is all equity financed. Now assume the firm issues $51,000 of debt paying interest of 8% per year and uses the proceeds to retire equity. The debt is expected to be permanent.
Suppose that with the $51,000 of debt and no costs to financial distress the firm has a value of $174,712.11. Suppose, in addition:
1) The debt issue raises the possibility of bankruptcy.
2) The firm has a 13% chance of going bankrupt after 2 years.
3) If it goes bankrupt, it will incur bankruptcy costs of 80,000.
4) The discount rate is 19%.
What is the value of the firm? Enter your answer rounded to two decimal places.