It is January 2nd. Senior management of Digby meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing 50,000 shares of stock plus a new bond issue. The CFO happily notes this will raise their Leverage (=assets/equity) to a new target of 2.8. Assume the stock can be issued at yesterday’s stock price ($37.80). Which of the following statements are true? Check all that apply.
Total Assets will rise to $233,984,000
The Digby Working Capital will be unchanged at $13,184
The Digby bond issue will be $3,402,000
Long term debt will increase from $84,814,944 to $86,704,944
Total investment for Digby will be $5,292,000
Digby will issue stock totaling $1,890,000