How can I calculate the costs of financial distress?

Question

anonymous · Answer

In a financial distress condition, the direct cost includes auditor's fee, legal fee, management fee and other charges.
It includes the debt restructuring because in my opinion, this is the only option to avoid bankruptcy company has.

anonymous · Answer

Thanks! And do you know how to calculate the value? Like the probability of default and how much is the cost od defaut?

anonymous · Answer

see..it is totally negotiable and controlled by management. It varies how big company is and it's operations so value deviates from company to company, geography to geography. I didn't find any specific answer of this, if get, will get back to you.

anonymous · Answer

These kind of valuations are challenging, because when you value the company you assume that the company is a going concern. There is a fair possibility that the business may cease to exist. I recommend that you read this paper, it helped me when I was doing similar task 2 years ago.