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
Additional paid in capital $25,000,000
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.
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 ...
The solution explains the preparation of a proforma balance sheet given new issue of shares.