Suppose that Dow Chemical issues 100 million shares at $35 share. Show the compa

Question

Suppose that Dow Chemical issues 100 million shares at $35 share. Show the company’s equity after the issue. (Negative amounts should be indicated by a minus sign. Enter your answers in billions rounded to 3 decimal places.)

Suppose that Dow subsequently repurchased 50 million shares at $30 a share. Rework part (a) to show the effect of the further change. (Negative amounts should be indicated by a minus sign. Enter your answers in billions rounded to 3 decimal places.)

Explanation / Answer

Par Value of Shares will increase = 100 million shares x $2.2 per share $220,000,000 Additional Paid up Capital increase = 100 million shares x ($35-$2.2) $3,280,000,000 In Billions   Common shares ($2.2 par value per share) $3,168,000,000 $3.17   Additional paid-in capital $5,583,000,000 $5.58   Retained earnings $17,753,000,000 $17.75   Treasury shares at cost -$256,000,000 -$0.26   Other -$4,892,000,000 -$4.89        Net common equity $21,356,000,000 $21.36 b. Treasury Shares will Increase = 50,000,000 shares x $30 per share $1,500,000,000 In Billions   Common shares ($2.2 par value per share) $2,948,000,000 $2.95   Additional paid-in capital $3,803,000,000 $3.80   Retained earnings $17,753,000,000 $17.75   Treasury shares at cost (-0.256+1.5) $1,244,000,000 $1.24   Other -$4,892,000,000 -$4.89        Net common equity $20,856,000,000 $20.86

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