Question

It is January 2nd. Senior management of Digby 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 2.43. Assume the stock can be issued at yesterday's stock price $23.03. Which of the following statements are true? (Select 2 answers) Digby bond issue will be $47,165 Total Assets will rise to $150,947,421 Digby working capital will be unchanged at $21,092,896 Long term debt will increase from $35,183,502 to $36,334,880 Total investment for Digby will be $2,796,837 Digby will issue stock totaling $1,151,378

Answer 1

Answer:

the answer is $75.670. the answer is $75.670

Answer 2

Answer:

1. Digby working capital will be unchanged at $21,092,896

2. Digby will issue stock totaling $1,151,378   (50,000*$23.03)

Explanation:

Digby working capital will be unchanged at $21,092,896 this because the fund to be raise is for financing a fixed asset- a plant and equipment.

Working Capital=Current Assets-Current Liabilities

Examples of current assets are Cash & Bank balances, stocks, receivables, etc.

Examples of current liabilities are payables, accrued expenses, etc.

Digby will issue stock totaling $1,151,378  i.e. (50,000*$23.03)