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Calculate the the new common stock value

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Reference no: EM132478724

Question - A company emerging from reorganization has the following balance sheet:

The company's reorganization value is $9,750,000. Liabilities subject to compromise are to be settled by converting them to notes payable in the amount of $5,000,000 and 80% of the new common stock. The remaining common stock goes to the existing preferred and common stockholders.

Assuming the reorganization plan qualifies for fresh start reporting, the new common stock will be valued at:

a. $650,000

b. $4,750,000

c. $362,500

d. $2,312,500

Reference no: EM132478724

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