Homework Answers
New value of loan = 7000$ - 10% written off due to bankruptcy = 6300 $
Total assets = Cash : 3500$ + Account receivable : 6300 $ + Corporate bonds : 1,000 $ = 10,800 $
Total liabilities = Long-term Loan : 4000 $ + Demand Deposits : 6000 $ = 10,000 $
New value of capital = Total assets - Total liab. = 10,800 - 10,000 = 800$
% Decline in value of assets = (Value of assets before bankruptcy - Value of assets after bankruptcy)/Value of assets before bankruptcy = (11,500 - 10,800)/11,500 = 6.09%
% Decline in value of capital = (Value of capital before bankruptcy - Value of capital after bankruptcy)/Value of capital before bankruptcy = (1500-800)/1500 = 46.67%
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