Currie & Associates Inc. was a mid-size company that was started five years ago by Arthur Currie with the support of four private investors. They initially invested $375,000 each for a total of $1.5 million and took back 15,000 common shares. The company also issued $2 million in preferred shares and secured a long-term loan for $500,000. The company had a few successful years; however, it succumbed to competition and it eventually ran out of funding. There are no dividends in arrears on the preferred shares. The company did successfully develop several products that it patented and it acquired assets to manufacture those products—all of which still have value. The shareholders are planning an organized windup of the company and plan to sell all the assets at an auction. A summary of the company’s statement of financial position is as follows:

CURRIE & ASSOCIATES INC.

Statement of Financial Position

as at June 30, 2020

Total assets .........................................................................     $4,835,600
Total liabilities (including long-term debt) ......................          550,000
Preferred shares ................................................................       2,000,000
Common shares ................................................................        1,500,000
Retained earnings .............................................................           785,600
Total liabilities and equity .................................................    $4,835,600

Required

a. How much will each group of shareholders receive on the windup if Currie & Associates is able to sell its assets for:

i. $1,756,600?

ii. $4,835,600?

iii. $6,000,000?

b. What could make the value of the assets higher than their carrying value?

c. What is the return to the common shareholders on windup for each of the three value scenarios in part “a” if dividends on common shares were never paid?