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The alternative financing methods that a listed company can use to raise extra cash to finance a new long-term investment project are stock and long-term debt. Section 2 and Section 3 discuss the alternative financing methods in detail. The last section evaluates the potential impacts on the company's market value once the announcement of financing method is made.
There is usually a stated value on each stock certificate called the par value. However, some stocks have no-par value. The total par value is the number of shares issued multiplied by the par value of each share and is sometimes referred to as the dedicated capital of a corporation. Shares of common stock are the fundamental ownership units of the corporation. The articles of incorporation of a new corporation must state the number of shares of common stock the corporation is authorised to issue. The board of directors of the corporation, after a vote of the shareholders, can amend the articles of incorporation to increase the number of shares authorised; there is no limit to the number of shares that can be authorised. There is no requirement that all of the authorised shares actually be issued. Although there are no legal limits to authorising shares of stock, some practical considerations may exist. Authorising a large number of shares may create concern on the part of the investors, because authorised shares can be issued later with the approval of the board of directors but without a vote of the shareholders. Capital surplus usually refers to amounts of directly contributed equity capital in excess of the par value. ...
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