Value of the operating assets of the firm$5,529.92 million
+ Cash and marketable securities $2,260.00 million- Market value of debt $4,922.75 million
= Value of equity $2,867.17 million - Value of options outstanding $ 14.31 million
= Value of equity in common stock $2,852.86 million
Value of equity per share $ 3.22
Valuedasagoingconcern,wewouldhaveassignedavalue
of $3.22 per share to Global Crossing’s equity.
Dealing with Distress
InIllustration17.1weestimatedthecumulativeprobabilityof
distressforGlobalCrossingtobe76.63percentoverthenext
10 years,and inIllustration17.2,weestimatedthedistress
saleproceedstobe 15 percentofbookvalue,basedonhow
much the assets of other bankrupt telecom firms were
receivinginthemarketplacecurrently.Combiningthesetwo
inputs,wearriveatanestimateofanexpectedvalueforthe
operating assets with distress built into the assumptions:
Ifweaddbackthecashandmarketablesecuritiesandnetout
the debt, we arrive at an adjusted value of equity for the firm.
Value of the firm $2,962.90 million
+ Cash and marketable securities$2,260.00 million
–Market value of debt $4,922.75 million