Answer:
Decrease in value of company due to expected bankruptcy cost = $414,000
Explanation:
As per the data given in the question,
According to M & M proportional I with taxes,
Levered firm value is = Equity + Debt
= $29,900,000 + 0.22 × $6,200,000
= $31,264,000
Market value of the firm = market value of debt + market value of equity
= $6,200,000 + 425,000 × $58
= $30,850,000
Decrease in value of company due to expected bankruptcy cost = $31,264,000 - $30,850,000
= $414,000
