The combined financial distress and agency costs associated with the debt are approximately 5…

Melvin Clark, CFO of the Matsushita Corp., is evaluating the compute of the attached’s floating excellent edifice. Being unsuppressed, he expects that Matsushita succeed own a continual EBIT of $800,000, delay an after-tax abatement rebuke of 10 percent if it is all-equity financed. Currently, the attached has $1.2 pet obligation. The corporebuke tax rebuke is 35 percent. The unvaried single tax rebuke in the management is 15 percent. Single tax rebukes on equity proceeds are effectively cipher accordingly of the possibility of infinite deferral of the event of excellent gains. The fully financial annoy and action costs associated delay the obligation are approximately 5 percent of the sum obligation compute.

a. What is the assumed compute of the obligation?

b. What is the attached compute of Matsushita?