Identify the remaining general creditors

Reference no: EM1360876

Pierre Imports will be liquidated. Its current balance sheet is shown below. Fixed assets are sold for $900,000 and current assets are sold for $700,000. All fixed assets are pledged as collateral for mortgage bonds. Subordinated debentures are subordinate only to notes payable. Trustee costs are $70,000.

Sale of current assets 700,000
Sale of fixed assets 900,000
Trustee costs 70,000

Before Before
Default Balance Sheet Default
Current Assets 1,260,000 Accounts payable 300,000
Net fixed assets 1,200,000 Accrued taxes 40,000
Accrued wages 25,000
Notes payable 45,000
Total current liabilities 410,000
First-mortgage bonds 600,000
Second-mortgage bonds 400,000
Debentures 500,000
Subordinated debentures 300,000
Common stock 200,000
Retained earnings 50,000
Total assets 2,460,000 Total claims 2,460,000

a. How much will SHs receive?
b. How much will mortgage bondholders receive?
c. How much will priority creditors receive?
d. Identify the remaining general creditors. How much will each receive before subordination adjustment?

e. How much will each general creditor receive after subordination adjustment?

5. Tundra Corporation is interested in acquiring Tantrell Corporation. Tantrell has 2 million shares outstanding and a target capital structure consisting of 40 percent debt. Tantrell's debt interest rate is 8 percent. Assume that the risk-free rate of interest is 3 percent and the market risk premium is 7 percent.

Tantrell's free cash flow (FCF0) is $3 million per year and is expected to grow at a constant rate of 6 percent a year; its beta is 1.2. Tantrell has $5 million in debt. The tax rate for both companies is 30 percent.

a. Calculate the required rate of return on equity using equation: rs= KRF + RPM(b)
b. Calculate weighted average cost of capital, using equation: WACC = Wdrd(1-%) + wsrs
c. Calculate the value of operations, using equation: Vops = FCF0(1+g)/WACC - g)
d. Calculate the value of the company's equity, using equation: Vs = Vops - debt
Calculate the current value of the company's stock, using equation:
Price per share = Vs/shares outstanding

6.Exchange rates for several countries are shown below. The MLC Company does business with companies in those countries.

U.S. Dollar / Japanese yen British Pound / U.S. Dollar U.S. Dollar / Mexican Peso
Spot 115 1.81 11.1
30-day forward 112 1.82 11.3
90-day forward 110 1.84 11.4
180-day forward 108 1.845 11.5

a. Is the U.S. dollar appreciating or depreciating against the Japanese yen? Explain.

b. Is the U.S. dollar appreciating or depreciating against the British pound? Why?

c. B. Is the U.S. dollar appreciating or depreciating against the Mexican peso? Why?

d. The U.S. company orders merchandise from companies in Japan, Britain, and Mexico, and pays in the foreign currency of each country at the end of 3 months. From a foreign exchange standpoint, would it be to the advantage of the U.S. company to pay now instead of waiting 3 months? Why or why not?

e. Who bears the foreign exchange risk, the U.S. company or the foreign suppliers? Explain.

Reference no: EM1360876

Questions Cloud

Effects on social status among peer groups : What are the affects of being a late maturer? What are the affects of being an early maturer? For example, what are the effects on social status among peer groups.

Explain the core of organized crime activity is labor : Explain The core of organized crime activity is labor racketeering and business racketeering and money laundering

What is the velocity of the boat relative to shore : A river flows due east at 1.50 m/s. A boat crosses the river from the south shore to the north shore by maintaining a constant velocity of 15 m/s due north relative to water.

Interpersonal communication of pathos-ethos-logos : Is Aristotle Classification Scheme ethos, pathos and logos beneficial for me to know or use in my everyday life?

Identify the remaining general creditors : Pierre Imports will be liquidated. Its current balance sheet is given below. Fixed assets are sold for $900,000 and current assets are sold for $700,000.

Explain how much influence does the health of a population : Explain How much influence does the health of a population have on the economy and What steps can we take to reduce this impact

Write application that inputs a telephone number as string : Write an application that inputs a telephone number as a string in the form (555) 555-5555. The application should String method split to extract the area code as a token.

Describe the common allegation : Describe the common allegation that when all firms in an industry are charging the same price, this indicates the absence of competition and the presence of someform of price-setting agreement

Find the wavelengths of the light : Find out the wavelengths of the light.

User Account

All Pages