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

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

Correct Answer:

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