How many additional assets can RTF, Inc. acquire if the company issues an additional $1,000 in common stock($ in millions)?
A) $1,000
B) $1,190
C) $1,500
D) $1,780
E) Cannot be determined from the information given.

Question

How many additional assets can RTF, Inc. acquire if the company issues an additional $1,000 in common stock($ in millions)?
A) $1,000 
B) $1,190 
C) $1,500 
D) $1,780 
E) Cannot be determined from the information given.

Quizplus · Accepted Answer

To determine how many additional assets RTF, Inc. can acquire, we need to use the equation:
Assets = Liabilities + Equity

We are given the balance sheet for RTF, Inc. before issuing any additional common stock:

Assets = $7,500 million
Liabilities = $2,500 million
Equity = $5,000 million

We are also told that if the company issues an additional $1,000 million in common stock, equity will increase to $6,000 million.

Using the equation above, we can solve for the new total assets:
$6,000 million = $2,500 million + New Assets
New Assets = $3,500 million

Therefore, the additional assets RTF, Inc. can acquire is:
New Assets - Original Assets = $3,500 million - $7,500 million = -$4,000 million

This means that RTF, Inc. cannot acquire any additional assets by issuing $1,000 million in common stock. However, this calculation assumes that all of the additional $1,000 million in common stock is issued as new equity. If some or all of the proceeds are used to pay off liabilities, then RTF, Inc. could potentially acquire additional assets. However, we cannot determine this from the information given.

How Many Additional Assets Can RTF, Inc