HighTech Inc was a small company started by four

entrepreneurs #298
HighTech Inc. was a small company started by four entrepreneurs a few years ago. They each
initially invested $200,000 and sold $1 million in preferred shares to a wealthy private investor.
The company did not earn much profit during its operations but was able to pay the promised
annual dividend of $100,000 on the preferred shares.The company did successfully develop
several patents, some of which it sold and some it still holds. The four shareholders are
planning to sell the remaining patents and all other assets and wind up the company to allow
them to move on to other ventures. A summary of the company’s statement of financial position
is as follows:HIGHTECH INC.Statement of Financial Positionas at April 30, 2016Total
assets.............. $2,110,700Total liabilities............ 85,000Preferred shares...........
1,000,000Common shares........... 800,000Retained earnings......... 225,700Total liabilities and
equity........ $2,110,700Required:a. How much will each group of shareholders receive on the
windup if HighTech is able to sell its assets for?i. $2,110,700?ii. $5,000,000?iii. $1,800,000?b.
Why is it unlikely that HighTech would be able to sell its assets for $2,110,700?c. If HighTech
had never paid dividends to the common shareholders, what would be the total rate of return
the common shareholders earned on their venture for each of the three prices given in part
“a”?View Solution:
HighTech Inc was a small company started by four entrepreneurs

ANSWER
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