Maxwell Corp. is coming to the market with a new offering of 450,000 shares of stock at $22 to the public. Maxwell will receive

Question

2 years ago

8

Maxwell Corp. is coming to the market with a new offering of 450,000 shares of stock at $22 to the public. Maxwell will receive

$19 per share. The firm has one million shares outstanding and earnings of $6 million before recording the new issue. What is the amount of dilution in earnings per share

Business

1 answer:

kramer · Answer 1 · 2022-05-16T18:37:39+03:00

Answer:

$1.86

Explanation:

Earnings per Share = Earnings Attributable to Holders of Common Stock ÷ Common Stock Outstanding

Old Earnings Per Share

Earnings per Share = $6,000,000 ÷ 1,000,000 = $6.00

New Earnings Per Share

Earnings per Share = $6,000,000 ÷ 1,450,000 = $4.14

Dilution in earnings per share = $6.00 - $4.14 = $1.86