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September 2007 exam

D

DA Taylor

Member
I don't understand the multiple choice question 10. My answer was D. Can someone explain this? Thanks.
 
DA Taylor said:
I don't understand the multiple choice question 10. My answer was D. Can someone explain this? Thanks.
Click to expand...

I would have said the exact same thing, to be completley certain that he will get paid off, they would need to realise the net asset value for atleast ~4.3 million, but i think what theyre saying is that the creditors who rank equally are payed off equally, so obviously the secured debenture holders are paid off first so thats atleast 0.6mil required, and for our creditors debt to be paid off 20%, he has 3.7 million dollars of equal ranking with the other creditors, so 20% of this is 0.74mil + 0.6mil of debenture stock = 1.34 mil.. pretty retarded i know
 
Thanks, I thought it might turn out to be something like that. I noticed a similar situation in another past exam - where they don't say that the % applies to ALL the creditors; this is such a farfetched assumption to make that they should not expect us to think like that!

Anyway, thanks again!
 
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