Corizon Company's balance sheet and income statement are shown below (in millions of dollars). Corizon and its creditors have agreed upon a voluntary reorganization plan. In this plan, each share of the $5 preferred will be exchanged for one share of $2.00 preferred with a par value of $50 plus one 10 percent subordinated income debenture with a par value of $50. The $8 preferred issue will be retired with cash. The company's tax rate is 30 percent.
a) -Construct the pro forma balance sheet after reorganization takes place. show the new preferred at its par.
How do I do that on a balance sheet?
b)Construct the pro forma income statement after reorganization takes place. How does the recapitalization affect net income available to common stockholders?
c)Calculate the required pre-tax earnings to cover debt and preferred stock obligations, before and after the recapitalization?