It is January 2nd and senior management of Digby meets to determine their investment plan for the year. They decide tofully fund a plant and equipment purchase by issuing 75,000 shares of stock plus a new bond issue. Assume the stockcan be issued at yesterday's stock price ($41.66) and leverage changes to 2.7. Which of the following statements aretrue? Select all that apply.Select : 3The total investment for Digby will be $24,031,182Total liabilities will be $148,850,148Digby will issue stock totaling $3,124,500Total assets will rise to $234,396,164Working capital will remain the same at $15,329,153Save Answer

In the event that a stock company requires additional capital, the company has the option of selling…

Answered: It is January 2nd and senior management…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 1MC

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It is January 2nd and senior management of Baldwin meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing 75,000 shares of stock plus a new bond issue. Assume the stock can be issued at yesterday’s stock price ($42.57) and leverage changes to 2.7. Which of the following statements are true? Select all that apply. Select: 3 •Total liabilities will be $150,548,149 •Total assets will rise to $238,527,765 •Working capital will remain the same at $16,224,801 •The total investment for Baldwin will be $25,924,850 •Baldwin will issue stock totaling $3,192,750
Blue Co. has a capital structure that consists of 25% equity and 75% liabilities. The company expects to report P3,000,000 in net income this year, and 50% of the it will be paid out as dividends to the shareholders. Determine how large must the firm’s capital budget be this year without resorting to issue any new common stock.
On January 1, 2021, Farmer Fabrication issued stock options for 100,000 shares to a division manager. The options have an estimated fair value of $6 each. To provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 5% in three years. Suppose that Farmer initially estimates that it is not probable the goal will be achieved, but then after one year, Farmer estimates that it is probable that divisional revenue will increase by 5% by the end of 2023. Required:1. What is the revised estimate of the total compensation?2. What action will be taken to account for the options in 2022?3. Prepare the journal entries to record compensation expense in 2022 and 2023. 1. Estimate total compensation $600,000 2. What action will be taken to account for the options in 2022? Farmer will reflect the cumulative effect on compensation in 2022 earnings. Record compensation expense for 2022 and 2023.…
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Blue Co. has a capital structure that consists of 25% equity and 75% liabilities. The company expects to report P3,000,000 in net income this year, and 50% of the it will be paid out as dividends to the shareholders. Determine how large must the firm’s capital budget be this year without resorting to issue any new common stock. a. 6,000,000 b. 2,000,000 c. 8,000,000 d. 240,000
Witter House is a calendar-year firm with 300 million common shares outstanding throughout 2024 and 2025. As part of its executive compensation plan, at January 1, 2023, the company had issued 30 million executive stock options permitting executives to buy 30 million shares of stock for $10 within the next eight years, but not prior to January 1, 2026. The fair value of the options was estimated on the grant date to be $3 per option. In 2024, Witter House began granting employees stock awards rather than stock options as part of its equity compensation plans and granted 15 million restricted common shares to senior executives at January 1, 2024. The shares vest three years later. The fair value of the stock was $12 per share on the grant date. The average price of the common shares was $12 and $15 during 2024 and 2025, respectively. The stock options qualify as an incentive plan. The restricted stock does not. The company’s net income was $150 million and $160 million in 2024 and…
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The directors of Gamma plc are investigating the possibility of launching a new product line which will require an initial investment of £2,400,000. The following is an extract from the Statement of Financial Position of Gamma plc for the year ended 31 December 2012: Creditors due in more than one year 6% Debentures £1,600,000 Long-term loan £400,000 Capital and reserves Issued share capital (4 million shares of 25p each) £1,000,000 The following information is also available: The authorized share capital is 8 million shares; The current market price per share at 31 December 2012 was 162p ex-dividend; The last dividend payment was 17 pence per share; Dividends are expected to grow at a constant rate of 7% per year; The current market price of debentures is £95 (ex-interest) and interest is payable each year on 31 December. The debentures are irredeemable; The interest rate on the long-term loan is 0.5 percentage points above LIBOR, which…

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