Definition for : Bankruptcy costs
Bankruptcy generates both direct (court proceedings, lawyers, etc.) and indirect costs (loss of credibility vis-à-vis customers and suppliers, loss of certain business opportunities, etc.). These costs have an impact on a company's choice of Financial structure. Their Present value should be deducted from the Enterprise value of a firm.
(See Chapter 46 Leveraged buyouts (LBOs) of the Vernimmen)
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