Lets go back to the Double-R Nutting Company. Suppose that Double-Rs bonds have a face value of $52. Its current market-value balance sheet is:

Who would gain or lose from the following maneuvers?

a. Double-R pays a $20 cash dividend.

b. Double-R halts operations, sells its fixed assets for $8, and converts net working capital into $30 cash. It invests its $38 in Treasury bills.

c. Double-R encounters an investment opportunity requiring a $20 initial investment with NPV = $0. It borrows $20 to finance the project by issuing more bonds with the same security, seniority, and so on, as the existing bonds.

d. Double-R finances the investment opportunity in part (c) by issuing more common stock.

Let's go back to the Double-R Nutting Company. Suppose that Double-R's bonds have a face value of $52. Its current market value balance sheet is: $ Book-Value Balance Sheet Liabilities and Equity 30 Bonds outstanding 20 Common stock 50 Total liabilities and shareholders' equity Assets Net working capital Fixed assets Total assets $ 35 15 $ $ 50 Who would gain or lose from the following maneuvers? a. Double-R pays a $20 cash dividend. b. Double-R halts operations, sells its fixed assets for $8, and converts net working capital into $30 cash. It invests its $38 in Treasury bills. c. Double-Rencounters an investment opportunity requiring a $20 initial investment with NPV = $0. It borrows $20 to finance the project by issuing more bonds with the same security, seniority, and so on, as the existing bonds. d. Double-R finances the investment opportunity in part (c) by issuing more common stock. Stockholders Bondholders a. b. . c. d