It is January 2nd. Senior management of Baldwin meets to determine their investm

Question

It is January 2nd. 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 50,000 shares of stock plus a new bond issue. The CFO happily notes this will raise their Leverage (=assets/equity) to a new target of 2.8. Assume the stock can be issued at yesterday’s stock price ($32.87). Which of the following statements are true? Check all that apply. Select: 3 The Baldwin Working Capital will be unchanged at $8,628 Long term debt will increase from $85,591,219 to $87,234,719 Total investment for Baldwin will be $4,601,800 Total Assets will rise to $225,764,000 Baldwin will issue stock totaling $1,643,500 The Baldwin bond issue will be $2,958,300

Explanation / Answer

Answer:

Value of Stock Issued = 50,000 x $ 32.87 = $ 1,643,500

The correct statements are;

1. The Baldwin Working Capital will be unchanged at $ 8,628

2. Baldwin will issue stock totaling $ 1,634,500

2.

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