Question

The Presley Corporation is about to go public. It currently has aftertax earnings of $6,500,000, and 3,000,000 shares are owned by the present stockholders (the Presley family). The new public issue will represent 700,000 new shares. The new shares will be priced to the public at $20 per share, with a 5 percent spread on the offering price. There will also be $300,000 in out-of-pocket costs to the corporation. a. Compute the net proceeds to the Presley Corporation. (Do not round intermediate calculations and round your answer to the nearest whole dollar.) Net proceeds b. Compute the earnings per share immediately before the stock issue. (Do not round intermediate calculations and round your answer to 2 decimal places.) Earnings per share c. Compute the earnings per share immediately after the stock issue. (Do not round intermediate calculations and round your answer to 2 decimal places.) Earnings per share

Answer 1

Answer:A. Net proceed $13,700,000

($20*700,000)-$300,000

B. Earnings per share $2.17

$6500,000/3,000,000 shared

C. Earnings per share $1.76

$6,500,000/3,700,000 shares