Question
In: Advanced Math
The Verbrugge Publishing Company’s 2019 balance sheet and income statement are as follows (in millions of...
The Verbrugge Publishing Company’s 2019 balance sheet and income statement are as follows (in millions of dollars):
Balance Sheet
Current assets Net fixed assets
Total assets
Income Statement
Net sales Operating expense
$300 200
$500
Current liabilities Advance payments by customers
Noncallable preferred stock, $6 coupon, $110 par value (1,000,000 shares) Callable preferred stock, $10 coupon, no par, $100 call price (200,000 shares)
Common stock, $2 par value (5,000,000 shares)
Retained earnings Total liabilities & equity
$ 40 80 110
200
10
60 $500
$540 516 $24 4 $28 7 $21 6 2 $13
Net operating income Other income EBT Taxes (25%)
Net income Dividends on $6 preferred Dividends on $10 preferred Income available to common stockholders
(24-3)
Liquidation
Verbrugge and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the noncallable preferred will be exchanged for 1 share of $2.40 preferred with a par value of $35 plus one 8% subordinated income debenture with a par value of $75. The callable preferred issue will be retired with cash generated by reducing current assets.
- Assume that the reorganization takes place and construct the projected balance. Show the new preferred stock at its par value. What is the value for total assets? For debt? For preferred stock?
- Construct the projected income statement. What is the income available to common shareholders in the proposed recapitalization?
- What were the total cash flows received by the noncallable preferred stockholders prior to the reorganization? What were the total cash flows to the original noncall- able preferred stockholders after the reorganization? What was the net income to common stockholders before the reorganization? After the reorganization.
- Required pre-tax earnings are defined as the amount that is just large enough to meet fixed charges (debenture interest and/or preferred dividends). What are the required pre-tax earnings before and after the recapitalization?
- How is the debt ratio (i.e., liabilities/total assets) affected by the reorganization? Suppose you treated preferred stock as debt and calculated the resulting debt ratios. How are these ratios affected? If you were a holder of Verbrugge’s common stock, would you vote in favor of the reorganization? Why or why not?
Solutions
Colby Messinger answered 2 years agoRelated Solutions
The Verbrugge Publishing Company's 2019 balance sheet and income statement are as follows (in millions of...
The Verbrugge Publishing Company's 2019 balance sheet and income
statement are as follows (in millions of dollars).
Balance Sheet
Current assets $300 Current Liabilities $40
Net fixed assets $200 Advance payments by customers $80
Noncallable Preferred Stock, $6 coupon, $110 par value (1,000,000
shares) 110
Callable preferred stick, $10 coupon, no par, $100 call price
(2,000,000 shares) 200
Common stock, $2 par value (5,000,000 shares) $10
Retained earnings $60
Total Assets $500 Total liabilities and equity $500
Income Statement
Net...
The Verbrugge Publishing Company's 2018 balance sheet and income statement are as follows (in millions of...
The Verbrugge Publishing Company's 2018 balance sheet and income
statement are as follows (in millions of dollars).
Balance Sheet
Current assets
$168
Current liabilities
$42
Net fixed assets
153
Advance payments
78
Goodwill
15
Reserves
6
$6 preferred stock, $112.50 par value (1,200,000 shares)
135
$10.50 preferred stock, no par, callable at $150 (60,000
shares)
9
Common stock, $1.50 par value (6,000,000 shares)
9
Retained earnings
57
Total assets
$336
Total claims
$336
Income Statement
Net sales
$540.0
Operating expense...
Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions...
Reorganization
The Verbrugge Publishing Company's 2016 balance sheet and income
statement are as follows (in millions of dollars).
Balance Sheet
Current assets
$168
Current liabilities
$42
Net fixed assets
153
Advance payments
78
Goodwill
15
Reserves
6
$6 preferred stock, $112.50 par value (1,200,000 shares)
135
$10.50 preferred stock, no par, callable at $150 (60,000
shares)
9
Common stock, $1.50 par value (6,000,000 shares)
9
Retained earnings
57
Total assets
$336
Total claims
$336
Income
Net sales
$540.0
Operating expense...
Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions...
Reorganization
The Verbrugge Publishing Company's 2016 balance sheet and income
statement are as follows (in millions of dollars).
Balance Sheet
Current assets
$168
Current liabilities
$42
Net fixed assets
153
Advance payments
78
Goodwill
15
Reserves
6
$6 preferred stock, $112.50 par value (1,200,000 shares)
135
$10.50 preferred stock, no par, callable at $150 (60,000
shares)
9
Common stock, $1.50 par value (6,000,000 shares)
9
Retained earnings
57
Total assets
$336
Total claims
$336
Income
Net sales
$540.0
Operating expense...
Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions...
Reorganization
The Verbrugge Publishing Company's 2016 balance sheet and income
statement are as follows (in millions of dollars).
Balance Sheet
Current assets
$168
Current liabilities
$42
Net fixed assets
153
Advance payments
78
Goodwill
15
Reserves
6
$6 preferred stock, $112.50 par value (1,200,000 shares)
135
$10.50 preferred stock, no par, callable at $150 (60,000
shares)
9
Common stock, $1.50 par value (6,000,000 shares)
9
Retained earnings
57
Total assets
$336
Total claims
$336
Income
Net sales
$540.0
Operating expense...
Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows (in millions...
Reorganization
The Verbrugge Publishing Company's 2016 balance sheet and income
statement are as follows (in millions of dollars).
Balance Sheet
Current assets
$168
Current liabilities
$42
Net fixed assets
153
Advance payments
78
Goodwill
15
Reserves
6
$6 preferred stock, $112.50 par
value (1,200,000 shares)
135
$10.50 preferred stock, no par,
callable at $150 (60,000 shares)
9
Common stock, $1.50 par value
(6,000,000 shares)
9
Retained earnings
57
Total assets
$336
Total claims
$336
Income
Net sales
$540.0
Operating expense...
Problem 24-02 Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows...
Problem 24-02
Reorganization
The Verbrugge Publishing Company's 2016 balance sheet and income
statement are as follows (in millions of dollars).
Balance Sheet
Current assets
$168
Current liabilities
$42
Net fixed assets
153
Advance payments
78
Goodwill
15
Reserves
6
$6 preferred stock, $112.50 par
value (1,200,000 shares)
135
$10.50 preferred stock, no par,
callable at $150 (60,000 shares)
9
Common stock, $1.50 par value
(6,000,000 shares)
9
Retained earnings
57
Total assets
$336
Total claims
$336
Income
Net sales
$540.0...
Problem 24-02 Reorganization The Verbrugge Publishing Company's 2016 balance sheet and income statement are as follows...
Problem 24-02
Reorganization
The Verbrugge Publishing Company's 2016 balance sheet and income
statement are as follows (in millions of dollars).
Balance Sheet
Current assets
$168
Current liabilities
$42
Net fixed assets
153
Advance payments
78
Goodwill
15
Reserves
6
$6 preferred stock, $112.50 par value (1,200,000 shares)
135
$10.50 preferred stock, no par, callable at $150 (60,000
shares)
9
Common stock, $1.50 par value (6,000,000 shares)
9
Retained earnings
57
Total assets
$336
Total claims
$336
Income
Net sales
$540.0...
A company’s Balance Sheet (in millions)
A company’s Balance Sheet (in millions)
Assets
Liabilities & Equity
Current
$120
Net
Fixed
$180
Bonds ($1000
Par)
130
Preferred stocks ($100 Par) 50
Total
$200
Common Stock ($1
par) 20
Total
$200
The company's bonds have 9 years to mature, pay 10% coupon rate
semi-annually and comparable bonds' YTM is 11%.
The company’s applicable tax rate is 40%.
The market price of common stock is $12.50 per share.
The common stock dividend has grown at a steady rate from...
Below is selected balance sheet and income statement information from O'Reilly (in millions) 2019 2017 Cash...
Below is selected balance sheet and income statement
information from O'Reilly
(in millions)
2019
2017
Cash
$ 1,600.00
$ 1,500.00
Accounts receivable
1,197.16
835.30
Current assets
4,013.56
3,018.33
Current liabilities
3,485.39
6,257.95
Long-term debt
17,620.81
3,611.63
Short-term debt
1,133.96
4,668.83
Total liabilities
23,318.42
26,463.17
Interest expense
1,666.90
1,438.29
Capital expenditures
1,645.48
1,211.50
Equity
4,600.00
-7,200.00
Cash from operations
610.89
685.98
Earnings before interest and taxes
1,594.84
2,002.84
Compute the following liquidity, solvency and coverage ratios
for both years.
(Round each...
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