The Management of Magic Mobile Homes Has Proposed to Reorganize

The management of Magic Mobile Homes has proposed to reorganize the firm. The proposal is based on a going-concern value of $2 million. The proposed financial structure is $750,000 in new mortgage debt,$250,000 in subordinated debt and $1,000,000 in new equity. All creditors,both secured and unsecured,are owed $2.5 million dollars. Secured creditors have a mortgage lien for $1,500,000 on the factory. The corporate tax rate is 34%. How much should the unsecured creditors receive?

A) $500,000
B) $667,000
C) $750,000
D) $1,000,000
E) None of these.