One of the factors that determines the present value (PV)of financial distress costs is
A)probability of financial distress.
B)costs of unpaid interest arrears.
C)loss of dividend payments.
D)employee compensation.

Question

Quizplus · Accepted Answer

The probability of financial distress is a key factor in determining the present value of financial distress costs. The higher the probability of financial distress, the higher the present value of the costs associated with that distress. This includes costs such as bankruptcy fees, legal fees, and the loss of business value due to reduced reputation, diminished goodwill, and lost customers. Therefore, the probability of financial distress is the most important factor in determining the present value of financial distress costs.

One of the Factors That Determines the Present Value (PV)of