Aspin Corporation’s charter authorizes issuance of

2,000,000 shares of common stock. Currently, 1,400,000 shares are outstand-
ing, and 100,000 shares are being held as treasury stock. The firm wishes to

raise $48,000,000 for a plant expansion. Discussions with its investment bankers
indicate that the sale of new common stock will net the firm $60 per share.

Question

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Respuesta :

andromache andromache · Answer 1 · 2020-07-19T02:58:51+02:00

Answer and Explanation:

The calculation of the sale of new common stock is shown below:-

a. Not issued = Authorized shares - Outstanding shares - Treasury stock

= 2,000,000 - 1,400,000 + 100,000

= 500,000

Now

Maximum shares = Not issued + Treasury stock

= 500,000 + 100,000

= 600,000

b. Since if we find out the number of shares that should be issued is

= $48,000,000 ÷ $60 per share

= 800,000

But the maximum shares is 600,000 so this shares would only be issued upto this limit only

Therefore the funds should not be raised

c. Now The firm could also develop extra 200,000 shares together it get amortized also.

Hence, it can sell 800,000 shares and the amount could rise to $48,000,000