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Business, 19.05.2021 18:20 soloriorafa
Faribault Company's balance sheet and income statement are shown below (in millions of dollars). The company 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 $1.00 preferred with a par value of $25 plus one 11% subordinated income debenture with a par value of $25. The $4 preferred issue will be retired with cash. The company's tax rate is 21 percent.
Current Assets 400 Current liabilities 350
Net fixed assets 450 Advance payments 20
$5 preferred stock, $100 par value (1,000,000) shares 100
$9 preferred stock, no par, callable at 100 (160,000 shares) 30
Common stock, $0.10 par value (10,000,000) shares 50
Retained earnings 300
Total assets 850 Total claims 850
Required:
a. Construct the pro forma balance sheet after reorganization takes place.
b. Construct the pro forma income statement after reorganization takes place. How does the recapitalization affect net income available to common stockholders?
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Faribault Company's balance sheet and income statement are shown below (in millions of dollars). The...
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