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Current earnings per share

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Reference no: EM133061934

Crestwood Ltd., a computer hardware company with sales of $28 million and a net profit margin of 6.5% is considering an expansion. Management estimates the expansion would result in sales growth of 10% yet would require raising $5 million in equity. Crestwood's share price closed yesterday at $15.25, and its underwriter believes it could sell the equity offering at $14.75. The underwriter's commission is 6.0%. There are currently 3.5 million shares outstanding.

Show all work.

-What are the current earnings per share (EPS)?

-What would the EPS be after the equity issue? Assume the expansion occurs after the share issue.

-Was there any EPS dilution? Explain why or why not.

-The underwriters suggested doing the deal on a "best efforts" basis. Explain what this means, and how this differs from a bought deal.

Reference no: EM133061934

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