At December 31, 2004, Enfron Corporation reported the following data (condensed in millions):

Question

Stockholders' equity 11470
Total current liabilities 28406
Long-term liabilities 25627 Investments and other assets 23379
Property, plant, equipment, net 11743
Total current assets 30381
Total expenses for 2004 99810
Total revenues for 2004 100789

During 2005, Enfron restated company financial statements for 2001 to 2004, after reporting that some data had been omitted from those prior-year statemetns.
Assume that the startling event of 2005 included the following:

. Several related companies should have been, but wre not, included in the Enron statements for 2004. These companies had revenues of $90 million,
total assests of $5,700 millions, expenses of $220 million, and iabilities totaling $5600 million.

. In January 2005, Enron's stockholders got the company to exchange $2,000 million of 12% long-term notes payable for their common stock. Interest is accrued at year end.

Take the role of an analyst with Moody's Investors Service. It is your job to analyze Enron Corporation and rate the company's long'term debt.

Required:
1- measure Enron's expected net income for 2005 two ways:
a. Assume 2005's net income should be approximately the same as the amount of net income that Enron actually reported for 2004
b. Rcompute expected net income for 2005 taking into account all the new developments of 2005
c. Evaluate Enron's likely trennd of net income for the future. Discuss wy this trend is develpoing. Ignore income tax.

2- Write Enron's accounting euation two ways:
a. As actually reported at December 31, 2004.
b. As adjusted for the events of 2005

3- Measure Enron's debt ratio as reported at Decembre 3, 2004, and after again making the adjustments for the event of 2005.

4- Based on your anaylysis, make a recommendation to the Debt-Rating committee of Moody's Investor Servic. Would you
recommend upgrading, downgrading, or leaving Enron's debt rating undisturbed (currently, it is "high-grade").