The Capital Structure of Springmaid Company Is as Follows ? the Company Has Decided to Raise Additional Capital by

question 50

Multiple Choice

The capital structure of Springmaid Company is as follows: $$\begin{array} { l r } \text { Long-term debt } & \$ 400 \text { million } \\\text { Common stock, } \$ 1 \text { par } & 50 \text { million } \\\text { Contributed capital in excess of par } & 250 \text { million } \\\text { Retained earnings } & 600 \text { million } \\\text { Total } & \$ 1,300 \text { million }\end{array}$$ ? The company has decided to raise additional capital by selling $100 million of 8% debentures with warrants attached. Each $1,000 debenture will have 40 warrants attached, and each warrant will entitle the holder to purchase one share of common stock at $20. Assume that no other changes in the capital structure occur between now and the time the warrants are exercised. Determine the common stock at par account balance after exercise of the warrants.

• A) $50 million
• B) $54 million
• C) $56 million
• D) $35 million

---

Definitions:

Petty Cash Fund

Fund (source) that allows payment of small amounts without the writing of checks.

Approved Voucher

A document or record that authorizes a payment and confirms that goods or services have been received and are satisfactory, ready for payment processing.

Unpaid Balance

The remaining amount of a debt or loan that has not yet been paid off by the borrower.

Voucher Document

A document recording the details of a financial transaction and used for authorizing the payment process.