What is the immediate dilution potential for this new stock

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Reference no: EM131118201

The Hamilton Corporation Company has 4 million shares of stock outstanding and will report earnings of $6,000,000 in the current year. The company is considering the issuance of 1 million additional shares that will net $30 per share to the corporation.

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

b. If the stock has a P/E ratio of 23 immediately after the offering, what will the stock price be?

c. Should the founding stockholders be pleased with the $40 they receive for their shares?

Reference no: EM131118201

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