Reference no: EM133062187
Southwestern Wear Inc. has the following balance sheet:
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Current assets
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$1,875,000
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Accounts payable
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$375,000
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Fixed assets
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1,875,000
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Notes payable
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750,000
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Subordinated debentures
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750,000
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Total debt
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$1,875,000
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Common equity
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1,875,000
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Total assets
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$3,750,000
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Total liabilities and equity
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$3,750,000
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The trustee's costs total $321,500, and the firm has no accrued taxes or wages. Southwestern has no unfunded pension liabilities. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $2.8 million is received from sale of the assets? Round your answers for monetary values to the nearest dollar and for percentage values to the nearest whole number. If your answer is zero, enter "0". Enter your answers as positive values.
Distribution of proceeds on liquidation:
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1. Proceeds from sale of assets
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$________
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2. First mortgage, paid from sale of assets
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$
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3. Fees and expenses of administration of bankruptcy
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$
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4. Wages due workers earned within 3 months
prior to filing of bankruptcy petition
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$
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5. Taxes
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$
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6. Unfunded pension liabilities
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$
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7. Available to general creditors
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$
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Distribution to general creditors:
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Claims of General Creditors
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Claim
(1)
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Application of 100% Distribution
(2)
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After Subordination Adjustment
(3)
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Percentage of Original Claims Received
(4)
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Notes payable
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$
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$
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$
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%
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Accounts payable
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$
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$
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$
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%
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Subordinated debentures
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$
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$
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$
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%
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Total
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$
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$
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$
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The remaining $__________ will go to the common stockholders. They will receive only % of the amount of equity on the balance sheet.
2. Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang's current value of equity is $58 million. Zang currently has 5 million shares outstanding and will issue 1.5 million new shares. ESM charges an 8% spread.
What is the correctly valued offer price? Do not round intermediate calculations. Round your answer to the nearest cent.
How much cash will Zang raise net of the spread (use the rounded offer price)? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar
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