Blue Pencil Publishing has been in financial distress for the past three years. The company's reorganization plans were rejected, and the bankruptcy court is forcing Blue Pencil Publishing to liquidate its assets and settle creditor claims. The court appointed the trustee with an estimated expense budget of $1,125,000. Subordinated debentures are subordinated only to the notes payable. Blue Pencil Publishing Balance Sheet (Thousands of dollars) $7,500 Current assets Net fixed assets 7,500 $1,500 3,000 3,000 Accounts payable Notes payable Subordinated debentures Total debt Common equity Total liabilities and equity 7,500 7,500 Total assets $15,000 $15,000 The trustee has arranged the sale of Blue Pencil Publishing's assets and estimates to receive $10.00 million in proceeds from the liquidation. The trustee has arranged the sale of Blue Pencil Publishing's assets and estimates to receive $10.00 million in proceeds from the liquidation. Proceeds from the liquidation will be used to settle Blue Pencil Publishing's liabilities. Based on your understanding of distribution of assets to various claimants, how much will common stockholders receive (if they receive anything at all) when Blue Pencil Publishing is liquidated? O $1,375,000 O $2,875,000 O $2,500,000 O $1,512,500 The bankruptcy courts and the company have discretion in how they elect to handle a failing firm. Just as the decision to reorganize or liquidate the firm depends on the relationship between its going concern and its liquidation values, the significance and competitiveness of the industry in which the failing firm operates also affects the court's decision. If Blue Pencil Publishing were a public utility company or a railroad service company instead of an industrial corporation, the bankruptcy courts would likely push for: Reorganization O Liquidation