80.2K

Verified Solution

Link Copied!

After five years of existence, AJI has the following capital structure: Common Stock (CS) FMV A/B Percent of Class Peter $80,000 $0 80% Gordon $20,000 $15,000 20% Preferred Stock (PS) Peter Kate $10,000 $10,000 $0 $10,000 50% 50% The PS has a total liquidation or redemption preference of $20,000 and pays a cumulative annual dividend of 6%. In the current year, AJI has AEP of $8,000 and will have CEP of $2,000. Considering each of the following scenarios independently and describe the results to the shareholders and AJI in each of the following: a. AJI distributes $1,200 with respect to the PS and $800 with respect to the CS. b. AJI distributes $1,200 with respect to the PS and $2,800 with respect to the CS. c. AJI distributes $1,200 with respect to the PS and $10,800 with respect to the CS. d. AJI distributes $1,200 with respect to the PS and 100 additional shares of CS with respect to the outstanding CS shareholders. e. AJI distributes 10 shares of PS to the CS shareholders. f. AJI redeems all the outstanding PS shares for $20,000. g. Peter sells his preferred shares to h. Peter and Kate announce their engagement and are promptly married at the Monte Carlo Hotel & Casino in Las Vegas, Nevada. As a wedding present, Peter has AJI redeem all of Kate's preferred stock for $20,000

Answer & Explanation Solved by verified expert

See Answer