What is immediate dilution potential for new stock issue

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1. Louisiana Timber Company currently has 5 million shares of stock outstanding and will report earnings of $6.99 million in the current year. The company is considering the issuance of 2 million additional shares that will net $36 per share to the corporation.

a- What is the immediate dilution potential for this new stock issue? (Do not round intermediate calculations and round your answer to 2 decimal places.)

b- Assume the Louisiana Timber Company can earn 11.40 percent on the proceeds of the stock issue in time to include it in the current year's results. Calculate earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.)

2. The Pioneer Petroleum Corporation has a bond outstanding with an $90 annual interest payment, a market price of $910, and a maturity date in five years. Assume the par value of the bond is $1,000.

Find the following: (Use the approximation formula to compute the approximate yield to maturity and use the calculator method to compute the exact yield to maturity. Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

a. Coupon rate %?_______

b. Current yield %?________

c-1. Approximate yield to maturity %?_________

c-2. Exact yield to maturity %?__________

Reference no: EM131299052

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