Firm BBB, under Chapter 11 bankruptcy proceedings, has an estimated going-concern reorganization value of $10.0 million. The last pre-bankruptcy sheet of the firm is below (this shows the "old" capital structure). Assume that there are no other claims from any party.

LAST PRE-BANKRUPTCY BALANCE SHEET

ASSESTS ($)

Current Assets: 7,000,000

Fixed Assets: 13,000,000

Total Assets: $20,000,000

LIABILITIES and NET WORTH ($)

Senior Debt: 6,000,000

Subordinated Debt: 9,000,000

Common Stockholder Equity: 5,000,000

TOTAL LIABILITIES and NET WORTH: $20,000,000

Assume that the reorganized "new" capital structure must be 60% debt and 40% common equity, with $4,000,000 of the new debt subordinated to senior debt. After the fair distribution of the new securities under the reorganization:

a. The "old" Senior Debt of $6,000,000 in the last pre-bankruptcy balance sheet will, after reorganization, received (among others) the "new" Subordinated debt of $4,000,000.

b. The "old" Senior Debt of $6,000,000 in the last pre-bankruptcy balance sheet will, after reorganization, received (among others) the "new" Senior debt of $4,000,000.

c. The "old" Subordinated debt of $9,000,000 in the last pre-bankruptcy balance sheet will, after reorganization receive (among others) "new" Subordinated debt of $4,000,000.

d. The "old" Subordinated debt of $9,000,000 in the last pre-bankruptcy balance sheet will, after reorganization receive no new Common Stockholders Equity.