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Date Posted: 13:18:42 01/22/02 Tue
Author: Dr. D.
Subject: Re: Question 4-b, page 51
In reply to: Sleepless in Atlanta 's message, "Question 4-b, page 51" on 12:58:35 01/22/02 Tue

First off, you win the prize for first posting of the new semester. The prize is the correct answer (what, you expected money or something?)

Actually, you're the 2nd student to ask this. So, I'll just paste my response to her in here.

The key is that you're looking for the total amount of funds you got from NEW stock. So, you have to focus on the CHANGES in the accounts from year to year. If you then know the # of new shares issued, you have the price per share of the NEW stock.

1) Before the issue, you had $1100/2 = 550 shares outstanding. After the issue (the next year), you had $1,250/2 = 625 shares outstanding. So, you issued 75 shares.

2) Prior to the issue, you had raised 1,100+7600 = 8,700 in total capital. After the issue, you had 1,250 + 9,200 = 10,450 in capital. So, you raised 10,450 - 8,700 = 1,750.

1,750 /75 = 23.33 per share.

To see it another way, for each NEW share issued at $23.33, your CASH account would go up by $23.33, your common stock account will increase by $2, and your capital surplus account will increase by $21.33.

Hope this helps.



>I'm having trouble getting the book answer to question
>4-b on page 51 of the text. I get an answer of $16.72
>per share for the price of the new common stock.
>Whare am I going wrong? To get this I added (common
>stock + additional paid in capital) and then divided
>the total by total number of shares outstanding.
>
>We have our first quiz tomorrow, and if I can't get
>this, i KNOW it will be on the quiz.
>
>Helllllllppppp!

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