Southern Goods Has an Estimated Going-Concern Value of $2 Million

question 35

Multiple Choice

Southern Goods has an estimated going-concern value of $2 million.As a result of negotiations the firm's bankruptcy reorganization plan consists of $600,000 in new mortgage debt,$250,000 in subordinated debt,and $1,150,000 in new equity.Currently the firm has a mortgage of $823,000,other secured debt of $89,000,and unsecured debt of $1.34 million.According to the APR,what will the stockholders receive if they currently have 2 million shares with a par value of $1 each?

• A)$0
• B)$315,714 in new equity
• C)$583,333 in a combination of new debt and equity securities
• D)$1,150,000 in new equity
• E)$940,000 in new equity

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Equation

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