Assignment Week 4
December doze, 2011
Complete Study Problem 13-5 in the end of Chapter 13 of the text and post to your teacher. Clearly labeled the calculation of the needed ratios and solve employing Excel. Use formulas to calculate the ratios and format the cells to insert a comma if you have more than three numbers. Circular dollar portions to the nearby whole money. Summarize the analysis within a concise supervision statement to never exceed 75 words.
13-5. (Flotation costs and issue size) D. Butler Inc. needs to increase $14 mil. Assuming that the marketplace price of the firm's inventory is $95, and flotation costs happen to be 10 percent in the market price, just how many shares would have to be issued? What is the dollar scale the issue? Selling price of the companies stock $95
Flotation cost 10 percent of market price
Stock price is $95, so the flotation Costs are $9. 55 (10% x $95) the firm obtains $95 - 9. 40 = $85. 50 every share
Therefore , to raise $14 million, the firm should issue $14, 000, 000 / $85. 50 sama dengan 163, 743 shares. The dollar size of the issue = $95 times 163, 743 = $15, 555, 585
Flotation cost is the cost that D. Retainer would incur when ever this makes any kind of offering of stocks or bonds. The flotation price includes the price of printing the formal paperwork used to record facts, pay out the fees from the authorities, and other cost that is necessary to run M. Butler Incorporation. The dollars size depending on the outcome will determine if chances are large or low. To raise 18 million, M Butler Incorporation. can either size the issue by shares or perhaps by dollars amounts. To solve for the number of shares for the issue:
Break down the amount of money the company needs to raise 14, 500, 000 by net selling price of the inventory 85. 40 (the cost of the inventory - 10 percent flotation costs) which equates to 163, 743 shares.
To solve for the dollar amount in the issue:
Multiply the number of stocks and shares 163, 743 times the marketplace price ninety five. 50 to get a total dollar amount of $15, 555, 556.