Studdy AI Logo
Math

QuestionAspin Corp can issue 2M shares; 1.4M are out, 100K are treasury. They need \$48M at \$60/share. Find max new shares, if they can raise funds, and steps for more authorization.

Studdy Solution

STEP 1

Assumptions1. The authorized number of shares is,000,000. The currently outstanding shares are1,400,0003. The treasury stock is100,000 shares4. The firm wishes to raise 48,000,0005.Thenetincomepersharefromthesaleofnewcommonstockis48,000,0005. The net income per share from the sale of new common stock is 60

STEP 2

First, we need to find the maximum number of new shares the firm can sell without receiving further authorization. We can do this by subtracting the number of outstanding shares and treasury stock from the authorized shares.
Maximum new shares=Authorized shares−Outstanding shares−Treasury stockMaximum\, new\, shares = Authorized\, shares - Outstanding\, shares - Treasury\, stock

STEP 3

Now, plug in the given values for the authorized shares, outstanding shares, and treasury stock to calculate the maximum number of new shares.
Maximum new shares=2,000,000−1,400,000−100,000Maximum\, new\, shares =2,000,000 -1,400,000 -100,000

STEP 4

Calculate the maximum number of new shares.
Maximum new shares=2,000,000−1,400,000−100,000=500,000Maximum\, new\, shares =2,000,000 -1,400,000 -100,000 =500,000

STEP 5

Now that we have the maximum number of new shares, we can find out if the firm will be able to raise the needed funds without receiving further authorization. We can do this by multiplying the maximum number of new shares by the net income per share.
Total funds=Maximum new sharestimesNet income per shareTotal\, funds = Maximum\, new\, shares \\times Net\, income\, per\, share

STEP 6

Plug in the values for the maximum number of new shares and the net income per share to calculate the total funds.
Total funds=500,000times$60Total\, funds =500,000 \\times \$60

STEP 7

Calculate the total funds.
Total funds=500,000times$60=$30,000,000Total\, funds =500,000 \\times \$60 = \$30,000,000

STEP 8

Compare the total funds with the needed funds. If the total funds are greater than or equal to the needed funds, the firm will be able to raise the needed funds without receiving further authorization.
Total funds>=Needed fundsTotal\, funds >= Needed\, funds

STEP 9

Plug in the values for the total funds and the needed funds to make the comparison.
$30,000,000>=$48,000,000\$30,000,000 >= \$48,000,000

STEP 10

The total funds are less than the needed funds, so the firm will not be able to raise the needed funds without receiving further authorization.

STEP 11

To obtain authorization to issue more than the number of shares found in part a, the firm must hold a vote among the shareholders. The proposal to issue more shares must receive the approval of a majority of the shareholders.
a. The maximum number of new shares of common stock that the firm can sell without receiving further authorization from shareholders is500,000. b. The firm will not be able to raise the needed funds without receiving further authorization. c. The firm must hold a vote among the shareholders to obtain authorization to issue more than the number of shares found in part a.

Was this helpful?

Studdy solves anything!

banner

Start learning now

Download Studdy AI Tutor now. Learn with ease and get all help you need to be successful at school.

ParentsInfluencer programContactPolicyTerms
TwitterInstagramFacebookTikTokDiscord