Question 1
C:2-31 Transfer of Property and Services to a Controlled Corporation. In 2010, Ed, Fran, and George form Jet Corporation. Ed contributes land having a $35,000 FMV purchased as an investment in 2006 for $15,000 in exchange for 35 shares of Jet stock. Fran contributes machinery (Sec. 1231 property) purchased in 2006 and used in her business in exchange for 35 shares of Jet stock. Immediately before the exchange, the machinery had a $45,000 adjusted basis and a $35,000 FMV. George contributes services worth $30,000 in exchange for 30 shares of Jet stock. a. What is the amount of Ed?s recognized gain or loss? b. What is Ed?s basis in his Jet shares? When does his holding period begin? c. What is the amount of Fran?s recognized gain or loss? d. What is Fran?s basis in her Jet shares? When does her holding period begin? e. How much income, if any, does George recognize? f. What is George?s basis in his Jet shares? When does his holding period begin? g. What is Jet?s basis in the land and the machinery? When does its holding period begin? How does Jet treat the amount paid to George for his services? h. How would your answers to Parts a through g change if George instead contributed $5,000 in cash and services worth $25,000 for his 30 shares of Jet stock? C:2-35 Incorporating a Sole Proprietorship. Tom incorporates his sole proprietorship as Total Corporation and transfers its assets to Total in exchange for all 100 shares of Total stock and four $10,000 interest-bearing notes. The stock has a $125,000 FMV. The notes mature consecutively on the first four anniversaries of the incorporation date. The assets transferred are as follows: Assets Adjusted Basis FMV Cash $ 5,000 $ 5,000 Equipment $130,000 Minus: Accumulated depreciation ) (70,000) 60,000 90,000 Building $100,000 Minus: Accumulated depreciation ) (49,000) 51,000 40,000 Land 24,000 30,000 Total 140,000 165,000 a. What are the amounts and character of Tom?s recognized gains or losses? b. What is Tom?s basis in the Total stock and notes? c. What is Total?s basis in the property received from Tom? C:3-39 Taxable Income Computation. Omega Corporation reports the following results for the current year: Gross profits on sales $120,000 Dividends from less-than-20%-owned domestic corporations 40,000 Operating expenses 100,000 Charitable contributions (cash) 11,000 a. What is Omega?s charitable contributions deduction for the current year and its charitable contributions carryover to next year, if any? b. What is Omega?s taxable income for the current year, assuming qualified production activities income is $20,000? C:3-50 Computing Taxable Income and Income Tax Liability. Pace Corporation reports the following results for the current year: Gross profit on sales $120,000 Long-term capital loss 10,000 Short-term capital loss 5,000 Dividends from 40%-owned domestic corporation 30,000 Operating expenses 65,000 Charitable contributions 10,000 a. What are Pace?s taxable income and income tax liability, assuming qualified production activities income is $55,000? b. What carrybacks and carryovers (if any) are available and to what years must they be carried?,I can add one more hour but that is it. What if the first 2 questions are answered will that allow time?
Question 2
Reflective Paper Draft The week 3 assignment is a rough draft of your final reflective paper. The rough draft should include an analysis of your morals and ethics and an analysis of your organization's morals and ethics, obviously applying the course concepts. Keep in mind that this is only a rough draft, but that does not mean it should be an outline or a simple restatement of the assignment directions. While the paper does not have to be a complete finished product, it should have a good portion of what you will have in your final paper. Reflective Paper This paper should begin with an analysis and evaluation of your values and ethics and then an analysis and evaluation pertaining to ethics in the organization for which you work (or in the absence of a current employer an important organization of which you are a part or a past employer). As a part of your evaluation, relate your organization?s ethics to combinations of the theories and concepts learned in this course. Include in your Reflective Paper a discussion of the following: 1. Your personal values, personal vision/mission statement and a personal code of ethics to guide you as a manager or future manager. 2. Your organization?s workplace values, culture/climate, vision/mission statement and code of ethics. (If any of these are not published, interpret them from organizational policies, observations and experiences therein, and examples of the organizational climate and/or operational practices.) 3. Your organization?s social responsibilities and your appraisal of whether and how effectively it meets those responsibilities. 4. Your organization?s ethical analysis and training programs, and an evaluation of their strengths and weaknesses 5. The moral philosophy(ies) and ethical principle(s) in your organization that you affirm most and least. Give specific, detailed examples of circumstances and contexts Relate all of these in a meaningful way to the most important concepts you learned throughout this course. Next, reflecting upon the judgments you have made, project how you would want to change the organizational culture/climate if you became the leader of your organization. Finally, present a plan for how you would go about implementing such change. In developing your plan, try to apply in an integrative and coherent manner everything of true significance related to such planning that you learned in this course and then think about/report specific scenarios that you would expect to result.,Rache All I need is a draft for the final paper that I will request from you in two weeks. When I request the final paper I will send you the reflective paper draft back. Hopefully you will accept this request. I attached what the final paper will contain in the request. Thank,The deadline can be 11 Apr, I will out of town.
Question 3
After having taken the fascinating FRL367 class you decided that you want to start your own business and apply your finance knowledge to make big bucks. And so several years ago you and a couple of your friends from Cal Poly opened a music store in the area, and you called your store ?Poly Tunes?. The company grew large and opened additional music store locations very quickly, and it even started issuing its own stock a year ago. It currently has 10,000 shares outstanding, owned by the co-owners of the store. Each share of stock is priced at $90. In recent years the competition with other music stores has been getting higher, and so you decided it?s a good time to evaluate your company?s riskiness and compare it with the risk of the competitors. You decided to hire a group of Research Assistants to do an analysis of the companies? performances over the last several years and try to make a prediction regarding their, as well as your company?s, performances in the future. The Research Assistants identified three main competitors in the music store business: I-Music, You-Tunes, and Songs ?R Us. These three companies have roughly the same market value. The assistants did some research and concluded that the risk of ?Poly Tunes? reflects the average risk of the competitors. The assistants also applied their statistical knowledge to analyze past data on various financial investments, including the competitors? stocks. Their study produced the following summary of the annual returns for each investment for the last 7 years: Year Annual returns (%) I-Music You-Tunes Songs ?R US S&P 500 stock index U.S. Treasury bills 2008 45 -5 51 38 3 2007 -5 0 20 22 3 2006 -10 15 1 5 3 2005 -10 18 -16 -13 3 2004 22 -9 30 -3 3 2003 8 0 0 18 4 2002 37 15 -15 -37 4 However, due to music industry instability prior to 2005, including data on annual returns for years 2002 through 2004 would create a negative bias in the risk valuation of these investments. And so the research assistants decided to only include data for the most recent four years into their statistical analysis. Based on the last four years? observed returns, they concluded that in the next years each of the four observed returns may occur again and the four possibilities are equally likely. Your successful company hired one more team of researchers who would be in charge of evaluating a new investment project: opening a new ?Poly Tunes? location in Pasadena. They were asked to analyze the projected revenues and costs and advise your company on whether the project would be profitable. Below is the information regarding the project: How long the new store will stay running for 5 years Initial investment into equipment, etc. raised solely from new equity issues $300,000 Number of music CDs sold in year 1 (This number is estimated to increase by 1,000 in each of the following years. In each year, 40% of all buyers are expected to be college students, and they will be getting a 10% discount on their entire purchases.) 22,000 Average price a regular customer pays for a CD $10 Cost of making a CD copy, cover, labels, and other variable costs per CD $4 Cost of making a sample single-song CD with a song of the most recent American Idol show winner offered for free to customers per each CD sold $0.5 Maintenance expenses, alarm system, fire insurance, and other fixed costs that need to be paid annually $30,000 Beta of the project 0.9 Corporate tax rate is 34%. The physical equipment purchased for the store will fully depreciate on the straight line over the full project life at the end of which it will be given away to thrift stores. Based on the above information, answer the following questions: Question 1. (4 points) Calculate the Betas of T-bills, S&P500 and the three music store competitors. Which one of the five has the highest total risk (explain what total risk means)? The highest systematic risk (explain what systematic risk means)? Calculate and explain all calculations. Question 2. (3 points) The first team of researchers analyzed ?Poly Tunes?? performance based on past data, and they concluded that the company?s stock correctly reflects its systematic risk. Based on this, what is the annual rate of return on equity that investors require? Calculate and explain. Question 3. (3 points) What is the weighted average cost of capital for the proposed investment project? Is the project as risky as the company? Calculate and explain. Question 4. (4 points) Would the second team of researchers recommend ?Poly Tunes? company?s managers to accept or reject the new Pasadena project? Calculate the net present value of the proposed project. Calculate and explain all calculations. Question 5. (4 points) How would the systematic risk of the company change if the project got accepted? For that you can use the information given earlier about the company?s current capital structure, and the fact that another $300,000 worth of additional equity was raised to cover the initial cost of the project. (Hint: you can view the new company with the project as a portfolio.) Calculate the answer and explain your calculations. Question 6. Together with your co-owners, you did some additional calculations and came to conclusion that paying for the initial investment of the project with equity alone is not optimal. You believe that financing seventy percent of total initial investment by debt and the remaining amount by equity would be a good target debt-equity ratio, and that using it would maximize the value of the Pasadena music store project. There is a slight chance that the debt obligations may not be covered in full if the annual revenues are lower than originally estimated. For this reason, creditors require a 2 percent higher expected return compared to that on the U.S. Treasury bills. It is interest-only loan, which means that the company will be required to make interest payments for five years, and the principal will be fully repaid at the end of the fifth year. (a) (4 points) What is the current value of the project using the Adjusted Present Value (APV) approach? Calculate and explain. (b) (4 points) What is the current value of the project using the Cash Flow-to-Equity (FTE) approach? Calculate and explain. (c) (4 points) Finally, what would be the current value of the project based on the Weighted Average Cost of Capital (WACC) approach? Calculate and explain. EXTRA CREDIT (5 points) Question 7. Would your answers to Question 6-(a), (b), (c) change if the debt instead looked like a five-year amortizing loan, with fixed total annual payments in all five years? (You can review what amortizing loans look like in Ross, Westerfield, Jordan textbook that you used in FRL300 class, or you can use other sources.) Explain all calculations as well as what changes in your answers to 6-(a), (b), and (c), where necessary.
Question 4
Quandrax Computers is a store that buys computer components for low prices, assembles the components into computers, and then sells the computers at high prices. Each computer is assigned a unique identification number, and computers that have common configurations are categorized into types (e.g. Longitude is a laptop that is easily networked and is recommended for businesses, Element is a desktop that is intended for home and small businesses). Categories can be entered into the database before any computers in the categories are actually assembled. The computer components are purchased from wholesalers. One of Quandrax?s purchasing agents submits an order to the wholesaler that has listed a given component for sale. If the order is accepted, one of Quandrax?s inventory clerks receives the items. Multiple orders accepted by the same supplier may be consolidated into one purchase. Orders are accepted in their entirety or not at all. Nearly all of Quandrax?s orders are accepted. Sometimes the incorrect components are delivered to Quandrax and Quandrax has to return them to the appropriate supplier. Sometimes Quandrax returns components to suppliers for other reasons, such as the result of a change in planned production of a certain category of computers. Only about 10 percent of Quandrax?s purchased components are returned to suppliers, and any return would result from only one purchase. When payment is due for a purchase, one of Quandrax?s cashiers issues one check for payment in full for the items on that purchase. Sometimes if multiple purchases have been made from the same supplier within a short time, Quandrax pays for those purchases with just one check. One of Quandrax?s managers is required to not only authorize all purchase orders greater than $5,000 but also to sign all checks (including checks written for expenditures other than purchases of computer components). Quandrax needs to keep track of the managers? participation in these events as well as the participation of other employees in these events. In physically implementing the conceptual model into the database tables, Quandrax wants to combine all employee types into just one table. This means Quandrax would keep the separate employee entities on the E-R diagram, but make just one employee table to represent all of the employee entities, then post keys or make relationship tables as necessary to implement all relationships of employees to the relevant events. All sales are handled via mail or e-mail, as Quandrax does not have any showrooms. Quandrax assigns salespeople to its large corporate customers and the salespeople take sample computers to the customer locations to demonstrate features as part of their sales calls. Only a small percentage of Quandrax?s sales calls result in orders, and sometimes a salesperson might need to make several sales calls to the same customer to obtain one order from that customer. Orders also result from customers surfing the Internet and seeing descriptions of the computers on Quandrax?s website. These customers are not assigned to specific salespeople; Quandrax only tracks the salesperson that actually took the order. Some of Quandrax?s salespeople are hired to handle just such orders and as such are not assigned specifically to any customers. If a customer orders multiple computers on one sale order and some of the computers are immediately available whereas the others are not yet assembled, Quandrax ships the available computers right away and then ships the remainder of the order when the rest of the computers are assembled. Sometimes Quandrax combines computers from multiple sale orders into a single shipment. For example, once a customer ordered 10 computers and the next day decided that wouldn?t be enough so he ordered 4 more. Quandrax shipped all 14 computers in one shipment. Quandrax only accepts checks for its sales of computers; customers can pay for multiple sales with a single check, but no partial payments are accepted. Each sale transaction is tracked by a shipment ID; an invoice is sent to the customer that is due within 10 days, with no discounts allowed. Quandrax does not allow any sale returns, that is, all sales are final. Cash receipts are never split between two cash accounts; rather each receipt is assigned to one of Quandrax?s cash accounts by one of Quandrax?s cashiers. Quandrax also receives cash from other activities such as loans, so the database must allow for that. Suppliers, employees, and customers need to be entered into the database before any transactions involving them occur. The following attributes are of interest to Quandrax; some are related to the sales/collection cycle. The attributes that are related to the acquisition/payment process must be included in your solution. Do not add attributes to the list. Use the boldface attribute abbreviations in parentheses next to the attributes in the list. List any assumptions you make, along with the reasons behind your assumptions (i.e., state what you think is vague in the problem, say what you are going to assume to clear up the ambiguity, and make a case for that assumption). Purchase Order Number (PO#) Sales Call ID (SC-ID) Supplier ID (SuppID) Cash Receipt ID (CR-ID) Employee ID (EmpID) Customer ID (Cust-ID) Purchase Order Date (PODate) Date of cash receipt (CR-Date) Purchase Date (PurchDate) Name of Customer (Cust-Name) Location of cash account (Ca-Loc) Total sale dollar amount (Sale-Amt) Cash Account Number (CashAcct#) Type of employee (EmpType) Name of supplier (SupName) Date of sale order (SO-Date) Receiving Report Number (RR#) Date of purchase return (PR-Date) Computer Category ID code (Cat-ID) Dollar amount of cash receipt (CR-Amt) Component ID code (CompoID) Current balance of cash account (AcctBal) Cash Disbursement Date (CD-Date) Shipping address for a customer (Cust-Ship) Name of employee (EmpName) Date of sale/shipment of computers (Ship-Date) Purchase return ID (PR-ID) Description of a computer category (Cat-Desc) Cash Disbursement Number (CD#) Computer component description (Comp-desc) Sale Order ID (SO-ID) Total dollar amount of a cash disbursement (CD-Amt) Shipment ID (Ship-ID) Standard cost for a computer component (Std-Cost) Date of sales call (SC-Date) Quantity of a computer component returned (Qty-Ret) Customer check number (CR-Chk#) Type of supplier (wholesaler or individual) (SupType) Identification number for a finished computer (CompuID) Quantity of a computer component ordered on purchase order (Qty-Ord) Proposed selling price for a type of computer on a sales call (Prop-SP) Ordered cost for a computer component on a purchase order (PO-Unit-Cost) Suggested selling price for computers [hint: by category] (List-price) Date assembly was completed for a finished computer (Assemb-Date) Quoted selling price for each item on a sale order (Ord-SP) Actual selling price for a particular finished computer (Act-SP) Quantity of a computer component received on a purchase (Qty-Rec) Actual cost of a computer component on a particular purchase (Item-Unit-Cost) Required: Create a business process level REA model (in either grammar or diagram format) for Quandrax Computers? acquisition/payment process. Be sure to include all relevant entities, relationships, attributes, and participation cardinalities.,Do you think you will be able to provide a solution? I have worked through the problem but am stuck in several places. This would help me to understand what I am missing.,URGENT!!! I just realized this says the Acquisition/payment process for the solution. I need the sales/collection process for tomorrow's assignment. I have to do the Acquisition/payment process two weeks from now. Are you able to provide the sales/collection process please for tommorrow's assignment? I would then repose the question and be happy to pay again for the acquisition/payment process for the next assignment, after (unless it will allow me to pay more now when we finish).,Ok, since I haven't had a reply within a certain length of time, I went ahead and re-posted it for the sales/collection process part. Hopefully, you get both and can make the money on both. The exercise is from the text "Enterprise Information Systems" by Dunn, Cherrington, & Hollander. Chapter 8, Applied Learning Exercise A1.,Hi, since you cancelled my duplicate posts where I indicated I need the sales/collection process instead (for today's assignment), I will safely assume you understand. Thank you very much kind sir for your patience and for helping me with this assignment. I am so lost in the diagraming.
Question 5
Chapter 13: 1. Which of the following does NOT always increase a company?s market value? a. b. c. d. e. 2. Akyol Corporation is undergoing a restructuring, and its free cash flows are expected to be unstable during the next few years. However, FCF is expected to be $50 million in Year 5, i.e., FCF at t = 5 equals $50 million, and the FCF growth rate is expected to be constant at 6% beyond that point. If the weighted average cost of capital is 12%, what is the horizon value (in millions) at t = 5? Horizon value at t=5 = Cash flow in year 6/(WACC - Growth rate) FCF in year 6 = 50 X 1.06 = 53 WACC = 12% and growth rate = 6% Horizon value = 53/(12%-6%) = $883 million 3. Suppose Yon Sun Corporation?s free cash flow during the just-ended year (t = 0) was $100 million, and FCF is expected to grow at a constant rate of 5% in the future. If the weighted average cost of capital is 15%, what is the firm?s value of operations, in millions? 4. A company forecasts the free cash flows (in millions) shown below. The weighted average cost of capital is 18%, and the FCFs are expected to continue growing at a 5% rate after Year 4. Assuming that the ROIC is expected to remain constant in Year 4 and beyond, what is the Year 0 value of operations, in millions? 5. Based on the corporate valuation model, the value of a company's operations is $800 million. Its balance sheet shows $50 million in accounts receivable, $70 million in inventory, $40 million in short-term investments that are unrelated to operations, $25 million in accounts payable, $90 million in short-term notes payable, $100 million in long-term debt, $25 million in preferred stock, $150 million in retained earnings, and $280 million in total common equity. If the company has 20 million shares of common stock outstanding, what is the best estimate of the common stock's price per share? 6. Island Industries forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 10% and the free cash flows are expected to continue growing at the same rate after Year 4 as from Year 3 to Year 4, what is the Year 0 value of operations, in millions? 7. One of Island Industries' divisions has above average risk and so a divisional weighted average cost of capital of 20%. This division has current sales of $600,000, operating income of $250,000, total net operating capital of $300,000, and a marginal tax rate of 35%. What is the Market Value Added (MVA) for this division if the constant growth FCF model applies and the division expects a constant growth in sales and FCFs of 6%? 8. Use the information from Case 74: Electro Technology Corporation to answer this question. Use the earnings multiple method to estimate the value of ETC's equity with the average projected earnings over the first three years as the best estimate of ETC's normalized earnings. Assume that stocks of publicly traded firms with somewhat similar technologies sell at an average of 6.5 times earnings. Chapter 11: 9. Sing Oil Company is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will be worthless, and it will be depreciated by the straight line method over 3 years. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's Year 1 operating cash flow? 10. Moore & Moore (MM) is considering the purchase of a new machine for $50,000, installed. MM will use the MACRS accelerated method to depreciate the machine, which is classified as 5-year property. MM expects to sell the machine at the end of its 4-year operating life for $10,000. If MM's marginal tax rate is 40%, what will the after-tax cash flow be when it disposes of the machine at the end of Year 4? 11. Temple is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight line method over its 3-year life, and would have a zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? 12. Sub-Prime Loan Company is thinking of opening a new office, and the key data are shown below. The company owns the building that would be used, and it could sell it for $100,000 after taxes if it decides not to open the new office. The equipment for the project has a 3 year class life and will be depreciated by the MACRS depreciation system over the project's 4 year life, and it will have zero salvage value at the end of the project. No new working capital will be required. What is the project's Profitability Index? 13. TexMex Products is considering a new salsa whose data are shown below. The equipment has a 3 year class life and will be depreciated by the MACRS depreciation system and it will have a positive pre-tax salvage value at the end of Year 3, when the project will be closed down. Also, some new working capital will be required, but it will be recovered at the end of the project's life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project's MIRR? 14. Waste Industries is analyzing an average risk project, and the following data have been developed. Unit sales will be constant, but the sales price should increase with inflation. Fixed costs will also be constant, but variable costs should rise with inflation. The project should last for 3 years, it will be depreciated on a straight line basis, and there will be no salvage value. This is just one of many projects for the firm, so any losses can be used to offset gains on other firm projects. What is the project's NPV? 15. Use the information from Case 13C: Heavenly Foods Corporation to answer this question. In Case question 14 relating to Table 4, assume the best case NPV stays at $596,236 and the worst case NPV stays at ($258,628) but the base case or most likely NPV drops to $165,000. Also, the probabilities change to 60% probability for the base case and both the best and worst cases have a 20% probability of occurrence. Find the coefficient of variation for the project's expected NPV. 16. Use the information from Case 13C: Heavenly Foods Corporation to answer this question. Usually sensitivity analysis changes 1 key input and holds all the other inputs at their most likely or base case value. For question 16, we will change 3 inputs at the same time and hold the other inputs at their most likely or base case. Assume the unit sales drops 10% to 630,000 units, the initial sales price drops 10% to $1.80, and the WACC increases 10% to 13.2%. What is the project's new NPV? Chapter 25: 17. Which of the following will NOT increase the value of a real option? a. b. c. d. e. 18. Which of the following is most CORRECT? a. b. c. d. e. Multi-Part 25-1: Texas Wildcatters Inc. (TWI) is in the business of finding and developing oil properties, and then selling the successful ones to major oil refining companies. TWI is now considering a new potential field, and its geologists have developed the following data, in thousands of dollars. t = 0: t = 1: t = 2: t = 3: 19. Refer to Multi-Part 25-1. Since the project is considered to be quite risky, a 25% cost of capital is used. What is the project's expected NPV, in thousands of dollars? 20. Refer to Multi-Part 25-1. Calculate the project's coefficient of variation. Multi-Part 25-2: Small Pharmaceuticals Corporation (SPC) is considering a project that has an upfront cost at t = 0 of $2,000. (All dollars in this problem are in thousands.) The project's subsequent cash flows are critically dependent on whether a competitor's product is approved by the Food and Drug Administration. If the FDA rejects the competitive product, SPC's product will have high sales and cash flows, but if the competitive product is approved, that will negatively impact SPC. There is an 80% chance that the competitive product will be rejected, in which case SPC's expected cash flows will be $1250 at the end of each of the next seven years (t = 1 to 7). There is a 20% chance the competitor's product will be approved, in which case the expected cash flows will be only $100 at the end of each of the next seven years (t = 1 to 7). SPC will know for sure one year from today whether the competitor's product has been approved. SPC is considering whether to make the investment today or to wait a year to find out the FDA's decision. If it waits a year, the project's upfront cost at t = 1 will remain at $2,500, the subsequent cash flows will remain at $1250 per year if the competitor's product is rejected and $100 per year if the alternative product is approved. However, if SPC decides to wait, the subsequent cash flows will be received only for six years (t = 2 to 7). 21. Refer to Multi-Part 25-2. Assuming that all the cash flows are discounted at 9%, if SPC chooses to wait a year before proceeding, how much will this increase or decrease the project's expected NPV in today's dollars (i.e. at t = 0), relative to the NPV if it proceeds today? 22. Refer to Multi-Part 25-2. Calculate the effect of waiting on the project's risk. By how much will delaying reduce the project's standard deviation of the expected NPV? 23. Refer to Multi-Part 25-2. Next, we plan to use the Black-Scholes model to estimate the value of this option to delay. Calculate P = current stock price = PV as of time zero of all expected future cash flows if the project is delayed for 1 year. 24. Refer to problem 23. Now use the Black-Scholes model to estimate the value of this option to delay. Use the P that you calculated in problem 23, plus assume that the variance of the project's rate of return is 40% and that the risk-free rate of return is 6%. Chapter 22: 25. Which of the following statements is most correct? a. b. c. d. e. 26. What would be the priority of the claims as to the distribution of assets in a liquidation under Chapter 7 of the Bankruptcy Act? 1 is the highest claim, 5 is the lowest. a. b. c. d. e. Almost Made It Corporation (AMIC) had the following balance sheet at the time it filed for bankruptcy (in thousands of dollars): Cash Receivables Inventories Total Current Assets Net Plant Net Equipment Total Assets The mortgage bonds are secured by the plant but not by the equipment. The subordinated debentures are subordinated to the notes payable. The firm was unable to reorganize under Chapter 11; therefore, it was liquidated under Chapter 7. The trustee, whose legal and administrative fees amounted to $500,000, sold off the assets and received the following proceeds (in thousands of dollars): ASSET Plant Equipment Cash Receivables Inventories Total No single wage earner had over $2,000 in claims, and there were no unfunded pension plan liabilities. Use the information on AMIC to answer questions 28 through 32. 27. As priority claims, the trustee fees, wages payable, and taxes payable had the same percentage of their claim satisfied. What percentage of their claims were satisfied? 28. The preferred shareholders and common shareholders had the same percentage of their claim satisfied. What percentage of their claims were satisfied? 29. What percentage of the mortgage bonds claims were satisfied? 30. What percentage of the accounts payable claims were satisfied? 31. What percentage of the subordinated debentures claims were satisfied? 32. Use the information from Case 39: Mark X Company to answer this question. If the land and building proceeds were only $1,500 instead of $5,000, what percentage of the mortgage debt would be satisfied?
