Welders Supply is reorganizing and has presented a proposal based on a going-con

Question

Welders Supply is reorganizing and has presented a proposal based on a going-concern value of $2 million after reorganization costs and delinquent wages, benefits, and taxes. The proposed financial structure is $750,000 in new mortgage debt, $250,000 in subordinated debt and $1,000,000 in new equity. Secured creditors currently have a mortgage lien for $1.5 million on the factory and the unsecured creditors’ claims total $1.2 million. How much of the new debt and equity securities should the secured creditors receive?

$1.1 million

$1.0 million

$1.3 million

$1.5 million

$.75 million

Explanation / Answer

the answer will be $1.5 million

because Secured creditors have the first priority so they will receive $1.5 million of the new $2 million of securities issued.

the above is the answer

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