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How much must newdex after-tax income increase to prevent

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Reference no: EM132873171

Question 1: Firm X needs to net $12,800,000 from the sale of common stock. Its investment banker has informed the firm that the retail price will be $22 per share, and that the firm will receive $18.50 per share. Out-of-pocket costs are $250,000. How many shares must be sold?

A. 581,526

B. 654,545

C. 659,091

D. 705,406

Question 2: Newdex has net income of $3,000,000 and 1,000,000 shares outstanding. It needs to raise $5,000,000 in funds for a new asset. Its investment banker plans to sell an issue of common stock to the public for $40, less a spread of 10%. How much must Newdex's after-tax income increase to prevent dilution of EPS?

A . $40,000

B. $416,667

C. $350,000

D. None of these

Question 3: The Hamilton Corporation currently has four million shares of stock outstanding and will report earnings of $6,000,000 in the current year. The company is considering the issuance of one million additional shares that will net $30 per share to the corporation.

Question 3a. What is the immediate dilution potential for this new stock issue? (What is the dilution in terms of EPS?)

Question 3b. Assume the Hamilton Corporation can earn 10.5 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 EPS? Give the new EPS figure.

Reference no: EM132873171

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