Two key qualitative factors determine the present value of financial distress co

Question

Two key qualitative factors determine the present value of financial distress costs: (I) the probability of financial distress and (2) 1 the magnitude of the costs after a firm is in distress. B. Technology firms are likely to incur high costs when they are in financial distress, due to the potential for loss of customers and key personnel, as well as a lack of tangible assets that can be easily liquidated. C. The magnitude of the financial distress costs will depend on the relative importance of the sources of these costs and is likely to vary by industry. D. Calculating the precise present value of financial distress costs is a relatively straightforward process.

Explanation / Answer

False : D

Calculating the precise present value of financial distress costs is a compicated process

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