Authorized and available shares. Aspin Corporation\'s charter authorices issuanc

Question

Authorized and available shares. Aspin Corporation's charter authorices issuance of 2,000,000 shares of commor stock. Currently, 1.400,000 shares are outstanding and 100,000 shares are being held as treasury stock. The firn wishes to raise $48,000,000 for a plant expansion. The sale of new common stock will net the firm $60 per share a. What is the maximum number of new shares of common stock the firm can sell without receiving further authorization from shareholders? b. Based on the data given and your finding in a. will the firm be able to raise the needed funds without receiving further authorization? c. What must the firm do to obtain authorization to issue more than the number of share found in a?

Explanation / Answer

Part A:

Authorized shares = 2,000,000

Shares outstanding = 1,400,000

Available shares = 2,000.000 - 1,400,000

Available shares = 600,000

Part B:

Amount required for expansion = 48,000,000

Amount from new shares = 600,000 * 60 = 36,000,000

Shortfall = 48,000,000 - 36,000,000

Shortfall = 12,000,000

Number of additional authorized shares required are = 12,000,000/ 60

Number of additional authorized shares required are = 200,000

Part C

Aspin must amend its corporate charter to authorize the issuance of additional share

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