The Marsh Company, Whose Present Balance Sheet Is Summarized Below

The Marsh Company, whose present balance sheet is summarized below, is considering the issuance of $50 million of 8% subordinated debentures that are convertible into common stock at a price of $20. $\begin{array}{llll}\text { Balance Sheet }\\\text { (millions of dollars) }\\\text { Current Assets } & \$ 150 & \text { Current Liabilities } & \$ 100 \\\text { Fixed Assets, net } & \$ 350 & \text { Long-term Debt } & \$ 150\\\text { Total } & \$ 500&\text { Common Equity } & \$ 250 \\&&\text { Total } & \$ 500\end{array}$ ? Determine the amount of long-term debt (LTD) and common equity (CE) on the pro forma balance sheet, assuming conversion of the entire issue. (Answers are in $ million.)

A) LTD $150, CE $250
B) LTD $150, CE $300
C) LTD $200, CE $300
D) LTD $200, CE $250

Correct Answer:

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