Needsalift, Inc. APRs
Needsalift, Inc. has $10 million in funds to distribute to its unsecured creditors. Two sets of possible claims are presented below.

-For Case I,what settlement will the unsecured bondholders receive?

Question

Needsalift, Inc. APRs
Needsalift, Inc. has $10 million in funds to distribute to its unsecured creditors. Two sets of possible claims are presented below.
 
-For Case I,what settlement will the unsecured bondholders receive?

Quizplus · Accepted Answer

The unsecured bondholders have a claim of $5 million with an APR of 10% and a claim of $2 million with an APR of 8%. The total interest on these claims is $530,000. Therefore, the amount available for distribution is $10 million - $530,000 = $9,470,000. The unsecured bondholders will receive a distribution proportional to their claim amounts. Using weighted average, their proportion is ($5 million/$7 million) * ($5 million/$10 million) + ($2 million/$7 million) * ($2 million/$10 million) = 0.7143. Thus, they will receive $9,470,000 * 0.7143 = $6,770,010. Then, the unsecured bondholders will receive $1,431,175 ($6,770,010 * (3%/4%)).

Needsalift, Inc. APRs Needsalift, Inc. Has $10 Million in Funds to Distribute to to Distribute