The management of the company decides on the following: Issue a corporate bond. Face value of the bond is 1.65 billion ISK, maturity is 10 years. The coupon rate is 5% with annual coupon payments. The yield of risk-free bonds with similar maturity is 1.5% p.a.

• The credit spread on bonds with similar default risk as the company is 2.8% p.a. There are no issuance fees or other transaction costs.

Issue 1 million additional shares of stock; each share can be issued at 1,075 ISK. There are no issuance fees or other transaction costs.

Buy a production plant for 2.9 billion ISK.

Remake the balance sheet to reflect the situation after these transactions. Assume that all transactions are made pretty much instantaneously after the reporting date reflected in the balance sheet in the first question. Provide explanations where necessary.

Balance Sheet in million ISK Assets Liabilities + Equity Long-term Assets Fixed Assets Stockholders' Equity 2,900 Common Stock 750 1,500 Current Assets Cash Accounts Receivable Inventory Long-term Liabilities 100 Long-term Debt 150 600 Current Liabilities Accounts Payable Short-term Liabilities 650 850 Total Assets 3,750 Total Liabilities & Equity 3,750