The Verbrugge Publishing Company’s 2019 balance sheet and income statement are as follows (in millions of dollars): Balance Sheet Current Assets $300 Currnet Liabilities $40 Net Fixed Assets 200 Advance Payment by customers 80     Noncallable preferred stock, $6 coupon, $110 par value (1,000,000 shares) 110     Callable preferred stock, $10 coupon, no par, $100 call price (200,000 shares) 200     Common stock, $2 par value (5,000,000 shares) 10     Retained earnings 60         Total Assets $500 Total liabilities & equity $500     Income Statement Net Sales $540 Operating expenses (516) Net Operating Income $24 Other Income 4 EBT $28 Taxes(25%) (7) Net Income $21 Dividends on $6 preferred (6) Dividends on $10 preferred (2) Income available to common stockholders $13 Verbrugge and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the non-callable 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 non-callable preferred stockholders prior to the reorganization? What were the total cash flows to the original noncallable preferred stockholders after the reorganization?

The Verbrugge Publishing Company’s 2019 balance sheet and income statement are as

follows (in millions of dollars):

Balance Sheet

Income Statement

Verbrugge and its creditors have agreed upon a voluntary reorganization plan. In this plan,

each share of the non-callable 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.

1. 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?

1. Construct the projected income statement. What is the income available to common

shareholders in the proposed recapitalization?

1. What were the total cash flows received by the non-callable preferred stockholders

prior to the reorganization? What were the total cash flows to the original noncallable

preferred stockholders after the reorganization? What was the net inco