Ask Question
28 July, 18:15

The Gable Inn is an all-equity firm with 16,000 shares outstanding at a value per share of $14.50. The firm is issuing $50,000 of debt and using the proceeds to reduce the number of outstanding shares. How many shares of stock will be outstanding once the debt is issued

+3
Answers (1)
  1. 28 July, 18:37
    0
    12,552 shares

    Explanation:

    Data provided:

    Initial outstanding shares of the firm = 16,000 shares

    Value of each share = $14.50

    Debt issued = $50,000

    Now,

    the number of shares used for issuing for $50,000 debt

    = Debt issued / value of each share

    on substituting the respective values, we have

    the number of shares used for issuing for $50,000 debt

    = $50,000 / $14.50

    = 3448.27 ≈ 3448 shares

    Now,

    The shares of stock that are outstanding once the debt is issued =

    = Initial outstanding shares - shares used for issuing for $50,000 debt

    = 16,000 - 3448

    = 12,552 shares
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “The Gable Inn is an all-equity firm with 16,000 shares outstanding at a value per share of $14.50. The firm is issuing $50,000 of debt and ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers