Lets go back to the Double-R Nutting Company. Suppose that Double-Rs bonds have a face value of $65. Its current market-value balance sheet is:

Book-Value Balance Sheet
Assets		Liabilities and Equity
Net working capital	$ 95	Bonds outstanding	$ 100
Fixed assets	85	Common stock	80
Total assets	$ 180	Total liabilities and shareholders equity	$ 180

Who would gain or lose from the following maneuvers?

Double-R pays a $85 cash dividend.

Double-R halts operations, sells its fixed assets for $21, and converts net working capital into $95 cash. It invests its $116 in Treasury bills.

Double-R encounters an investment opportunity requiring a $85 initial investment with NPV = $0. It borrows $85 to finance the project by issuing more bonds with the same security, seniority, and so on, as the existing bonds.

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