It is January 2nd and senior management of Baldwin meets to determine their inve

Question

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 ($37.61) and leverage changes to 2.7. Which of the following statements are true? Select all that apply. Select: 3

1.Working capital will remain the same at $16,296,930

2.Total liabilities will be $121,082,334

3.The total investment for Baldwin will be $208,600,464

4.Equity will be $84,697,379

5.Baldwin will issue stock totaling $2,820,750

6.Total Assets will rise to $221,066,899

Explanation / Answer

ans)

Total Assets (given) - Total Liabilities (given) = Total Stockholders' Equity (plug)

221066899 - 121082334 = 99984565

New stock issued = 75000 X 37.61 = 2820750

Total Stockholders' Equity (above) - New stock issued (above) = Old Stock

99984565 - 2820750 = 97163815

Total Assets / Total Stockholders' Equity = Leverage

221066899 / 99984565 = 2.21 or 2.7

Since this gives us the desired leverage figure, we can be confident of TA, TSE, and TL

True statements are:

1. Total liabilities = 121082334

2. Baldwin will issue stock totalling $2820750

3.Total Assets will rise to $221066899

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.