Question

Authorized and available shares???Aspin? Corporation's charter authorizes issuance of

2 comma 400 comma 0002,400,000

shares of common stock.? Currently,

1 comma 300 comma 0001,300,000

shares are? outstanding, and

300 comma 000300,000

shares are being held as treasury stock. The firm wishes to raise

$ 78 comma 000 comma 000$78,000,000

for a plant expansion. Discussions with its investment bankers indicate that the sale of new common stock will net the firm

?$6565

per share.

a.??What is the maximum number of new shares of common stock that the firm can sell without receiving further?authorization?

b.??Judging on the basis of the data given and your finding in part

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 shares found in part

a??

a.??What is the maximum number of new shares of common stock that the firm can sell without receiving further?authorization?

nothing

shares???(Round to the nearest whole? number.)

Answer 1

a) Maximum number of shares that firm can sell = Authorized shares - outstanding shares = 2,400,000 - 1,300,000 = 1,100,000

b) No. of shares required to be issued = Funds required / price per share = $78,000,000 / $65 per share = 1,200,000

Since no. of shares required are more than the maximum no. of shares it can sell, the firm will not be able to raise funds without receiving furher authorization.

c) Further authorization required = 1,200,000 - 1,100,000 = 100,000

So, the firm will need to create and authroize further 100,000 shares. The firm will need to amend its incorporation charter to authorize further issue.