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It is January 2nd. Senior management of Chester meets to determine their investment plan for the year.

This question was answered on Jan 06, 2013. View the Answer
It is January 2nd. Senior management of Chester 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 2.7. Assume the stock can be issued at yesterday’s stock price ($41.51). Which of the following statements are true? Check all that apply.
Select: 3

Chester will issue stock totaling $2,075,500
The Chester bond issue will be $3,528,350
The Chester Working Capital will be unchanged at $16,919
Long term debt will increase from $84,013,408 to $86,088,908
Total Assets will rise to $232,052,000
Total investment for Chester will be $5,603,850
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SOLUTION
(a) The Company has issued 50,000 shares of stock at $41.51 each. Hence the total
stock issue is $2,075,500.
The first option Chester will issue stock totaling $2,075,500 is correct.
(b)...

This question was asked on Jan 06, 2013 and answered on Jan 06, 2013.

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