Magic Mobile Homes is to be liquidated.All creditors,both secured and unsecured,are owed €2 million.Administrative costs of liquidation and wages payments are expected to be €500,000.A sale of assets is expected to bring €1.8 million after all costs and taxes.Secured creditors have a mortgage lien for €1,200,000 on the factory which will be liquidated for €900,000 out of the sale proceeds.The corporate tax rate is 34%.How much and what percentage of their claim will the unsecured creditors receive,in total?

Question

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The unsecured creditors will receive €290,909, which is 36.36% of their claim.The total amount available to creditors is €1.8 million - €500,000 = €1.3 million. The secured creditors have a claim of €1.2 million, which will be paid in full. The unsecured creditors will receive the remaining €100,000.

Magic Mobile Homes Is to Be Liquidated