A firm has just filed for bankruptcy and is likely to be liquidated. The creditors, such as

Question:

A firm has just filed for bankruptcy and is likely to be liquidated. The creditors, such as equipment suppliers and employees, are owed $1.5 million.
a. How much will the equity holders receive if, when liquidated, the firm’s assets are worth?
i. $1.7 million?
ii. $1.2 million?
b. Suppose that equity holders did not have limited liability. How much would they receive for each asset value above?