The Hamilton Corp. has 35,000 shares of common stock outstanding with a book value of $20 per share. It owes creditors $1.5 million at an interest rate of 12%. Selected financial results are as follows.

Restructure the financial line items shown assuming a composition in which creditors agree to convert two-thirds of their debt into equity at book value. Assume Hamilton will pay tax at a rate of 15% on income after the restructuring, and that principal repayments are reduced proportionately with debt. Who will control the company, and by how big a margin after therestructuring?

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Income and Cash Flow Capital EBIT interest EBT lax EAT Depreciation Principal repayment Cash flow 80,000 180,000 S100,000) 0 S100,000) 50,000 (75,000) S125,000) Debt Equity $1,500,000 700,000 $2,200,000