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ABC is about to file for bankruptcy. Chapter 11 will cost $10 and chapter 7...

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Accounting

ABC is about to file for bankruptcy. Chapter 11 will cost $10 and chapter 7 will cost $5. The company owes creditors $120 but B consulting values the company at $80 if it continues and $65 if it is liquidated.

What will be the value the market will assign to the company if it files for chapter 11? What offers can be made in a workout by shareholders to bondholders and vice versa?

This one is a bit more difficult- if C consulting values the firm at $125. Can shareholders still make bondholders an offer they cannot refuse (there is still the competing valuation by B on the table).

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