Sanfran, Inc. decided to split off its gift retail subsidiary named J. Wall (JW). Assume Sanfran holds 1.5 million shares of JW at a net book value $72 million and the current market value of JW shares is $57.60 per share. Assume a 1 to 1 share transaction.
a. What would be the effect on the balance sheet if shares are distributed pro rata?
b. What would be the effect on the balance sheet if shares are distributed non pro rata?
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