2. Problem 25-02 (Reorganization) Reorganlzation The Verbrugpe Publishing Companys 2021 balance sheet and income statement are as follows (in millions of dotars). Bislanase chank Vertarugge and its creditors have agreed upon a voluntary reorganization plen. In this plan, ench share of the noncaltable preferred will be exchanged for 1 share of 52 . to preferreo wath a par value of $33 plus one 9% subordinated income debenture with a par value of $77. The callable pheferred lssue wis be retired with cash generated by reducing current assets. h.25: End-of-Chapter Problems - Bankruptcy, Reorganization, and Liquidation with a par value of $33 plus one 9% subordinated income debenture with a par value of $77, The callable preferred issue will be retired with cash generated by reducing currer assets. A. Assume that the ceorgankasion takes place and construct the projected balance. Show the new preferred stock at its par value, What is the value for total assets? for preferred stock? Enter pour answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number. The projected balance sheot (in milions of doliars) follows: Wat is the vslue for debt (L.e, llabilities)? Do not treat preferred stock as debt. Enter your answer in millions, For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the neareat whole number. s miltion b. Construct the projected income statement. What is the income avalable to common shareholders in the proposed recapitalization? Do not round intermediate caiculations. Enter your answers in milions, For example, an answer of $1.23 million should be entered as 1.23 , not 1,230,000. Round your answers to two decimal places. The projected income statement (in millions of dotian) follows: c. What were the total cash flows received by the noncaliable preferred stockholders prior to the reorganization? What were the total cash flows to the original noncallable preferred stockholders after the reorganization? Do not round intermofiate calculations. Enter your answers in mullions. For example, an answer of $1.23 malion should entered as 1.23, not 1,230,000. Round your answers to two decimal places. Tatal cash flow to noncallable preferred stockholders before recapitalization: $ mialion Total cash flow to noncallable preferred stockholders after recapitalization: \$ million What was the net income to common stockholders before the reorganization? After the rearganization. Do not round intermediate calculatians. Enter your answers in miltions. For example, an answer of $1.23 miltion should be entered as 1.23 , not 1,230,000. Round your answers to two decimal places. Net income to common stockholders before recapitalization: $ million Net income to common stockholders after recapitalization: 4 milition d. 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 ofter the recapitalization? Do not round intermediate calculations. Enter your answers in millions. For example, an answer of st:23 million should be entered as 1.23 , not 1,230,000. Round your answers to two decimal places. Required pre-tax earnings before recapitalization: \$ milion Required pre-tax earnings after recapitalzation: miltion e. How is the debt ratio (Le., liabilities/total assets) affected by the reorganization? Round your answers to two decimai places. Debt ratio before reorganization: \%6 Debt ratio after reorgonization: \% Suppose you treated preferred stock as debt and calculated the resultieg debt ratios. How are these ratios affected? Debt ratio before reorganization: Debt ratio after reorganization: If you were a holder of Verbrugge's common stock, would you vote in favor of the reorganization? Why or why not? , because (a) earnings to shaveholders are (2) eamings required to cover fixed charges (including preferted dividends) are income debentures are risky to the shareholders than preferred stock. , and (3)