Authorized and available shares. Aspin Corporation's charter authorizes issuance of 2,000,000 shares of common stock. Currently, 1,400,000 shares are outstanding and 100,000 shares are being held as treasury stock. The firm wishes to raise $48,000,000 for a plant expansion. Discussions with its investment bankers indicate that the sale of new common stock will net the firm $60 per share.
What is the maximum number of new shares of common stock the firm can sell without receiving further authorization from shareholders?
Based on the data-given and your finding in part a, will the firm be able to raise the needed funds without receiving further authorization?
What must be the firm do to obtain authorization to issue more than the number of shares found in part a?
2.Preferred dividends. Slater Lamp Manufacturing has an outstanding issue of preferred stock with an $ 80 par value and an 11 % annual dividend.
a. What is the annual dollar dividend? If it is paid quarterly, how much will be paid each quarter?
b. If the preferred stock is noncumulative and the board of directors has passed the preferred dividend for the last 3 years, how much must be paid to preferred stockholders before dividends are paid to common stockholders?
c. If the preferred stock is cumulative and the board of directors has passed the preferred dividend for the last 3 years, how much must be paid to preferred stockholders before dividends are paid to common stockholders?
3. Preferred dividends. In each case in the following table, how many dollars of preferred dividends per share must be paid to preferred stockholders before common stock dividends are paid?
Case
Type
Par value
Dividend per share per period
Periods of dividends passed
A
Cumulative
$80
$5
2
B
Noncumulative
$110
8%
3
C
Noncumulative
$100
$11
1
D
Cumulative
$60
8.5%
4
E
Cumulative
$90
9%
0
4.Underwriting spread. Hildreth Recycling is interested in selling common stock to raise capital for plant expansion. The firm has hired First Atlanta Company, a large investment banking firm, to serve as underwriter. First Atlanta believes that the stock can be sold for $ 80 per share, that its administrative costs will be 2 % of the sale price, and that its selling costs will be 1.5 % of the sale price. If First Atlanta requires a profit equal to 1 % of the sale price, how much will the spread have to be, in dollars, to cover its costs and profits?