Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Macrosoft Corp. is a small computer software development business established a few years ago by Bernie and Mike, who contributed a total of $400,000 cash

Macrosoft Corp. is a small computer software development business established a few years ago by Bernie and Mike, who contributed a total of $400,000 cash to capitalize Macrosoft.

As a result of subsequent stock issues to Bernie (for an additional $200,000) and to employees of the corporation (in lieu of cash bonuses when the corporation was nearly bankrupt a few years ago), Bernie now owns 45 percent of the stock, Mike owns 20 percent, and 35 percent is owned by sixty different employees, none of whom holds more than 1% of the stock. The aggregate value of the stock of Macrosoft, which is not publicly traded, is about $5,000,000, but if Macrosoft does not keep pace with the development of new software, it could be bankrupt within a year. The corporation requires approximately $1,000,000 to fund new research and has devised the following plan:

(a) Bernie will lend the corporation $200,000. The loan will be

represented by a promissory note due in ten years, and will bear interest at the prime rate, plus three percent, compounded and due semi-annually.

(b) Mike will lend the corporation $100,000 for one year, at the prime rate, and purchase 100 shares of $300 dollar par value preferred stock for $300,000.

(c) Ivan Milkem, a venture capitalist, will purchase $400,000 worth of common stock.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Management Measuring Monitoring And Motivating Performance

Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook

2nd Canadian Edition

1118168879, 9781118168875

More Books

Students also viewed these Accounting questions