Shaw Products Company, whose present balance sheet is summarized here, is considering issuing $100 million of 6 percent subordinated debentures (par value ¼

$1,000), which are convertible into common stock at a price of $40.

Balance Sheet (in Millions of Dollars)

Current assets $200 Current liabilities $100 Fixed assets, net 300 Long-term debt 150 Total assets $500 Common equity $250 Total liabilities and equity $500

a. Show the pro forma balance sheet for the issuance of the convertibles prior to conversion. Assume the proceeds are invested in new plant and equipment, and disregard issuance costs. L01