A company is about to go public. It currently has after-tax earnings of 4,500,000. and 300,000 shares are owned by the present stockholders. The new public issue will represent 400,000 new shares. The new shares will be priced to the public at $15.00 per share with a 4% spread on the offering price. There will also be $160,000 in out of pocket costs to the corporation.
Compute the net proceeds to this company
b. compute the earnings per share immediately before the stock issue
c. Compute the earnings per share immediately after the stock issue.
E. Determine what rate of return must be earned on the proceeds to the corp. so there will be a 10% increase in Earnings per share during the year of going public.
D. Determine what rate of return must be earned on the net proceeds to the corporation so there will not be a dilution in earnings per share during the year of going public.