Calculate the required pre-tax earnings to cover debt

Reference no: EM13268302

Corizon Company's balance sheet and income statement are shown below (in millions of dollars). Corizon and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the $5 preferred will be exchanged for one share of $2.00 preferred with a par value of $50 plus one 10 percent subordinated income debenture with a par value of $50. The $8 preferred issue will be retired with cash. The company's tax rate is 30 percent.

a) -Construct the pro forma balance sheet after reorganization takes place. show the new preferred at its par.

How do I do that on a balance sheet?

b)Construct the pro forma income statement after reorganization takes place. How does the recapitalization affect net income available to common stockholders?

c)Calculate the required pre-tax earnings to cover debt and preferred stock obligations, before and after the recapitalization?

Reference no: EM13268302

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