What are the direct and indirect costs of bankruptcy? Briefly explain each.

Description of Costs

1. What are the direct and indirect costs of bankruptcy? Briefly explain each.

2. Chrysler’s financial structure in August 1983 was as follows:

Security Number of Units
Outstanding
Price per
Unit
Market
Value
Common stock

115,000,000

$26.00

$2,990,000,000

Preferred stock

10,000,000

32.5

325,000,000

Warrants

14,400,000

13.5

194,400,000

Bonds

2,000,000

650

1,300,000,000

Due to large losses incurred during 1978–1981, Chrysler had $2 billion in tax-loss carryforwards; therefore, the next $2 billion of income was free from corporate income taxes. At the time, the consensus of security analysts was that Chrysler would not have cumulative profits in excess of $2 billion over the next five years. Most of the preferred stock was held by banks. Chrysler had agreed to retire the preferred stock over the next few years. Chrysler had to decide whether to issue debt or sell common equity to raise the funds needed to retire the preferred stock. If you were Lee Iacocca, what would you have done? Why?

Do You Need A Similar Assignment?

Place an order with us. Our skilled and experienced writers will deliver a custom paper which is not plagiarized within the deadline which you will specify.

Note; 6 Hours urgent orders deliver also available.

If you need more clarifications contact our support staff via the live chat for immediate response.

 

Type of paper Academic level Subject area
Number of pages Paper urgency Cost per page:
 Total: