Restructuring Debt

3. Equity financing = $8,400,000(0.60) = $5,040,000 2011 Dividends = Net income - Equity financing = $14,400,000 - $5,040,000 = $9,360,000 All of the equity financing is done with retained earnings as long as they are available.

A company had a beginning balance in retained earnings of $44,500. It had net income of $7,500 and paid out cash dividends of $6,000 in the current period. The ending balance in retained earnings equals:

At the date of contribution, the land has a $350,000 built in gain. Recognition of this gain is deferred and the partnership takes a carryover basis of $250,000. When the land is distributed, the FMV of the land has increased to $870,000, increasing the built in gain to $620,000

We have determined that consideration transferred amounts to $135 million, land and buildings should be recorded using the “in-use” valuation

Wahoo Inc. is a C Corporation that filed for Chapter 11 bankruptcy protection in April 2015. Before filing bankruptcy, Wahoo has net operating loss (NOL) carryforwards of $65,000,000 in 2009, $45,000,000 in 2010, and $30,000,000 in 2011. The company worked out a re-organization plan and one of the note holders (a venture capital firm that financed the company) with a $105,000,000 note payable will receive new common stock and the old stocks will be cancelled. The Bankruptcy Court and the creditors’ committee have accepted the plan. The fair market value of Wahoo before the ownership change was $85,000,000. Wahoo’s selected assets from the balance sheet are as follows:

The owner’s initial investment consists of $38,000 cash and $46,000 in land in exchange for its common stock.

The allocations of bases were then applied to the potential sale of the property totaling $1,200,000. This creates a sale price of $809,715 for the business and land and $453,295 for the house. This followed Publication 551 which states that you take the fair market value of the particular asset given up divided by the total fair market value at the time of purchase, then times it by the sale price. This will give you what to allocate for each asset in order to calculate your gain. If you were to sell the business, home, and land, there would be a total taxable gain of $926,000 consisting of $349,785 attributable to the house and $576,215 attributable to the business before any tax effects. Our recommendation of selling the house with an exclusion and making a non-taxable like-kind exchange for the business will greatly reduce the taxes on the transaction. If the house is sold, it will be eligible for a $250,000 exclusion on the taxes of the sale, which will result in total taxable gain of $102,785, after the depreciation recapture for the home office. The like-kind exchange for the business will involve trading the business for another business, which means you could buy a bed and breakfast without making a separate transaction and you will defer taxes. The tax payment will be deferred until the traded property is disposed of. The total

I think that my idea is much better because it will free up funds that could be reallocated where it is needed such as healthcare expenses. These issues really need to be addressed and reevaluated and something needs to be done immediately. It will never be practiced because the politicians will not reduce their income and we will continue seeing cutbacks from our veterans, elderly, and disabled populations.

Our approach to valuing the processing plant can easily be decomposed into three distinct steps first, find the value of the foreseeable free cash flows. Next, calculate the terminal value of the project. Finally, take the present value of those flows. The next few paragraphs walk through each of these steps in order of progression.

Classify the following as long term or current liabilities: Accounts Payable, Accrued Liabilities, Note Payable with total balance due in 5 years, Mortgage Loan with payments made monthly over 5 years.

To do this we had to calculate the reinvestment rate w/o synergies and the return on capital (RoC).

7. Debt to capitalization = Long-term Debt in Balance Sheet / Long term debt + Net Assets in

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Long-term debt rated “BBB” has “adequate capacity to meet its financial commitments.” However, in the face of uncertain economic conditions, the borrower is more likely to default or experience difficulty meeting its financial obligations. Long term government of Canada debt is a more secure form

I have included the firm's original income statement and balance sheet without the purchase and then with the machine purchase. I have assumed that the firm would use the $218,000 to reduce the bank loans balance for each year. This reduction of the bank loan balance will lower their three restrictive financial ratios.