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Foundations Of Financial Management
Found in: Page 538
Foundations Of Financial Management

Foundations Of Financial Management

Book edition 16th
Author(s) Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Pages 768 pages
ISBN 9781259277160

Short Answer

The trustee in the bankruptcy settlement for Titanic Boat Co. lists the following book values and liquidation values for the assets of the corporation. Liabilities and stockholders’ claims are also shown.


Book value

Liquidation value

Accounts receivables






Machinery and equipment



Building and plant



Total assets



Liabilities and stockholder’s claims


Accounts payable


First lien, secured by machinery and equipment


Senior unsecured debt


Subordinated debenture


Total liabilities


Stockholder’s claims

Preferred stock


Common stock


Total stockholder’s claims


Total liabilities and stockholder’s claims


d. After the machinery and equipment are sold to partially cover the first lien secured claim, how much will be available from the remaining asset liquidation values to cover unsatisfied secured claims and unsecured debt?

The asset value left after machinery and equipment is sold to partially cover first lien is $4,200,000.

See the step by step solution

Step by Step Solution

Information provided in question

Total liquidation value of assets = $5,200,000

Total liquidation value of liabilities = $7,600,000

Liquidation value of machinery and equipment = $600,000

Liquidation value of asset left after deducting administrative costs = $4,800,000

Calculation of asset value left after deducting liquidation value of first lien machinery and equipment

The asset value left is $4,200,000.

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