Find the immediate dilution potential

Reference no: EM1349373

Pebble Beach Country Club currently has 4 million shares of stock oustanding and will report earnings of $7 million in the current year. The company is considering the issuance of 500,00 additional shares that will net $35.00 per share to the corporation.

a. What is the immediate dilution potential for the new stock issue?

b. Assume that they can earn 9 percent on the proceeds of the stock issue in time to include it in the current year's results. Should the new issue be undertaken based on earnings per share?

Reference no: EM1349373

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