33. Costs of Financial Distress. Let's go back to the Double-R Nutting Company. Suppose that Double-R's bonds have a face value of $50. Its current market-value balance sheet isWho would gain or lose from the following maneuvers? (LO3)

a. Double-R pays a $10 cash dividend.

b. Double-R halts operations, sells its fixed assets for $6, and converts net working capital into $20 cash. It invests its $26 in Treasury bills.

c. Double-R encounters an investment opportunity requiring a $10 initial investment with NPV = $0. It borrows $10 to finance the project by issuing more bonds with the same secu- rity, seniority, and so on, as the existing bonds.

d. Double-R finances the investment opportunity in part

(c) by issuing more common stock.

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Assets Liabilities and Equity Net working capital $20 Bonds outstanding $25 Fixed assets 10 Common stock 5 Total assets $30 Total liabilities and shareholders' equity $30