The explicit costs,such as the legal expenses,associated with corporate default are classified as ________ costs.
A)unlevered
B)beta conversion
C)direct bankruptcy
D)indirect bankruptcy
E)flotation

Question

Quizplus · Accepted Answer

Direct bankruptcy costs include expenses related to the legal process of declaring bankruptcy, which can include legal fees, court costs, and administrative fees. Indirect bankruptcy costs refer to the broader impacts of bankruptcy, such as lost sales, decreased value of assets, and damage to reputation. Unlevered and beta conversion costs are not related to corporate default, while flotation costs refer to expenses associated with issuing new securities.

The Explicit Costs,such as the Legal Expenses,associated with Corporate Default