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# Proforma Balance Sheet

Transnational Corporation Balance Sheet

Current Liabilities \$10,000,000
Long-Term Debt \$18,000,000
Common stock (5,000,000 shares @ \$1 par value) \$5,000,000
Retained earnings \$42,000,000
Total Liabilities and equity \$100,000,000

Transnational is considering selling an additional 1 million shares, and it is the investment bankers estimate the selling price to be \$40/share. Calculate how much this will change the company's book value and produce a new pro-forma balance sheet.

#### Solution Preview

When the shares are sold, the firm will get 1,000,000X40=\$40,000,000 in cash. This will increase the cash balance by \$40,000,000. In the balance sheet, Common Stock will increase by 1,000,000 since it has par value of \$1 and the remaining \$39,000,000 will go to additional paid in capital. The Liability and Equity side of the ...

#### Solution Summary

The solution explains the preparation of a proforma balance sheet given new issue of shares.

\$2.19