Determine what rate of return must be earned

Assignment Help Finance Basics

Reference no: EM132051098

Question: The Presley Corporation is about to go public. It currently has aftertax earnings of $7,500,000, and 2,600,000 shares are owned by the present stockholders (the Presley family). The new public issue will represent 400,000 new shares. The new shares will be priced to the public at $25 per share, with a 5 percent spread on the offering price. There will also be $290,000 in out-of-pocket costs to the corporation.

1) Determine what rate of return must be earned on the net proceeds to the corporation so there will not be a dilution in earnings per share during the year of going public. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Rate of Return = ______%

2) Determine what rate of return must be earned on the proceeds to the corporation so there will be a 5 percent increase in earnings per share during the year of going public. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Rate of Return = ________%

Reference no: EM132051098

Questions Cloud

Confidence interval for the estimated beta : What is the 95% confidence interval for the estimated beta? what is the company's cost of capital?

Exposing jpmorgan chase the bank : The business model for JPMorgan Chase was change in 2008. Could the upside of the strategy have been achieved without exposing JPMorgan Chase the bank?

Background providing risk management consulting services : The other has a background providing risk management consulting services to department stores. Which person would you choose if everything else was equal?

What are the erm strengths and weaknesses of strategy : In the process, the bank gave enormous trading authority to one individual. What are the ERM strengths and weaknesses of this strategy?

Determine what rate of return must be earned : Determine what rate of return must be earned on the proceeds to the corporation so there will be a 5 percent increase in earnings per share during the year.

Determine the price of the bonds at january : Instaform, Inc., issued 10% bonds with a face amount of $50 million, dated January 1. Determine the price of the bonds at January 1, 2016

Define organizational communication : 1. Define organizational communication 2. What interesting about the subject of organizational communication

Calculate the equivalent annual cost of a new jet : The president's executive jet is not fully utilized. You judge that its use by other officers would increase direct operating costs by only $35,000 a year.

Activities that are associated with the summer olympics : What are some examples of "marketing" activities that are associated with the Summer Olympics?

User Account

All Pages