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?

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?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 9MC

See similar textbooks

Related questions

Q: The Beranek Company, whose stock price is now $25, needs to raise$20 million in common stock.…

A: The formula used to compute number of shares is as follows:

Q: A company has 5 million outstanding preferred shares with a market value of $45 per share. The…

A: Preference shares are a special type of shares which pay annual dividend irrespective of the…

Q: House of Haddock has 5,050 shares outstanding and the stock price is $145. The company is expected…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Fishwick Enterprises has 201,500 shares outstanding, half of which are owned by Jennifer Fishwick…

A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…

Q: Blasco's has a market value equal to its book value. Currently, the firm has excess cash of €1,332,…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Lara’s Inc. is currently an unlevered firm with 450,000 shares of stock outstanding, with a market…

A: Calculation of the shares investor holds of Lara’s Stock is shown below: Hence, the total number of…

Q: Raybac is about to go public. Its present stockholders own 500,000 shares. The new public issue will…

A: The question is based on the concept of Shares

Q: Maxwell Corp. is coming to the market with a new offering of 450,000 shares of stock at $22 to the…

A: The conceptual formula used:

Q: Fishwick Enterprises has 222,500 shares outstanding, half of which are owned by Jennifer Fishwick…

A: There are 222,500 shares outstanding. Half shares are owned by Jennifer Fishwick & the rest of…

Q: Big Industries has the following market-value balance sheet. The stock currently sells for $20 a…

A: "Since you have posted a question with multiple sub parts, we will solve first three sub parts for…

Q: Lightbridge corporation has 500,000 shares of common stock that currently trade for $40 per share.…

A: Computation of the market price of share one year from now is shown below:

Q: When Microsoft went public, the company sold 2 million new shares (the primary issue). In addition,…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Harper Industries has $400 million of common equity on its balance sheet; its stock price is $70 per…

A: The conceptual formula used:

Q: Walker Machine Tools has 7 million shares of common stock outstanding. The current market price of…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: In previous years, Cox Transport reacquired 2 million treasury shares at $24 per share and, later, 1…

A: Weighted Average cost No. of shares Price Total 2 24 48 1 27 27 Total 3 75 Average…

Q: Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Harper Industries has $300 million of common equity on its balance sheet; its stock price is $80 per…

A: Book Value of common equity= $300,000,000 Market Value (MVA)= $50,000,000 Price per share= $80 per…

Q: Paradise Travels is an all-equity firm that has 9,000 shares of stock outstanding at a market price…

A: Number of stock outstanding=9000Market price =$27Worth of debt=$25000Interest rate on the debt=7.3%

Q: Sun Instruments expects to issue new stock at $36 a share with estimated flotation costs of 9…

A: Stock price = $36 Flotation cost = 9% Current dividend = $1.70 Growth rate = 3%

Q: If a company has 2240 million shares outstanding and each share is worth AUD 3.60 the market…

A: Shares outstanding will be all of a company's shares that have already been approved, issued, and…

Q: Lightbridge corporation has 500,000 shares of common stock that currently trade for $40 per share.…

A: Price to earnings ratio (PE ratio) compares the price with earnings per share. It will be calculated…

Q: Taunton's is an all-equity firm that has 150,000 shares of stock outstanding. The CFO is considering…

A: Stock outstanding= 150,000 shares Borrowing= $215,000 Interest rate= 7 percent interest…

Q: Walker Machine Tools has 6 million shares of common stock outstanding. The current market price of…

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: Angina Inc. has 5 million shares outstanding. The firm is considering issuing an additional 1…

A: Calculate the net proceedings as follows:

Q: A company has 20,858,702 shares outstanding. In an IPO, the firm issued 3,000,000 new shares. The…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3 sub-parts of the first question.…

Q: Suppose a Sam's company in CA, completes an $95 million IPO priced to the public at $50 per share.…

A: Solution We are provided with the following information Amount raised from IPO = $ 95 million = $…

Q: Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the…

A: The question is related Dividend policy. The details are given. The Price of Share is calculated…

Q: Fishwick Enterprises has 201,500 shares outstanding, half of which are owned by Jennifer Fishwick…

A: Total Wealth = Closing price * Number of shares Cost of underpricing shares = [ Closing Price -…

Q: Blue TJ’s has a market value equal to its book value. Currently, the firm has excess cash of…

A: A company tends to repurchase the shares for several reasons such as improving the financials,…

Q: The Sullivan Co. needs to raise $78 million to finance its expansion into new markets. The company…

A: A company can issue shares in the market in order to finance its operations. When making a primary…

Q: The stock price of Wards Company is currently $35. Wards need to raise $25 million by issuing common…

A: wards company needs to raise $25 million in total..they are seeking it to issue at the price of…

Q: The Taussig Company, whose stock price is currently $20.50, needs to raise $15 million by issuing…

A: Company requires the amount of $15,000,000. But there will be underwriter's compensation also.…

Q: Borg Security Systems is considering the sale of 12,000 shares of stock to finance development of a…

A: Common shares are the equity holders of the entity and these are the owners of the entity.

Q: The stock of Payout Corp. will go ex-dividend tomorrow. The dividend will be $1 per share, and there…

A: Dividend is the amount of return on the shares of an entity.

Q: The Windsor Corporation has 120,000 shares outstanding with a current market price of $8.10 per…

A: Number of new shares to be raised = Additional Amount to be raisedSubscription Price…

Q: TJ's has a market value equal to its book value. Currently, the firm has excess cash of $218,500,…

A: Given:

Q: The Sullivan Co. needs to raise $65.8 million to finance its expansion into new markets. The company…

A: Required proceeds = 65,800,000/(1 - 0.08) = 71,521,739.1304

Q: Over the years, Masterson Corporation's stockholders have provided $35,000,000 of capital when they…

A: Market Value Added (MVA) refers to the net difference between the total value added by the investors…

Q: ABC Corp. issued new shares with a par value of P1,000, issue price of P1,200 and net proceeds of…

A: Cost of equity is the cost of financing with the common stock or retained earnings. It is the…

Q: Cullumber, Inc., a high-technology firm in Portland, raised a total of $60 million in an IPO. The…

A: Given:

Q: Fishwick Enterprises has 201,500 shares outstanding, half of which are owned by Jennifer Fishwick…

A: Firm issue shares for arrange the funds for firm’s operations. When firm issue particular type of…

Q: Company S has 4,000 shares outstanding and a total stockholders’ equity of $200,000. It is about to…

A: Acquisition is a business process that takes place between two business entities, wherein one…

Q: When Microsoft went public, the company sold 2 million new shares (the primary issue). In addition,…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2 : Computation:

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

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 earnings per share after the stock issuance?
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 spread in dollars?
Francis Corp. is coming to the market with a new offering of 1,000,000 shares, at $20 to the public. Francis Corp. will receive $17 per share. The firm has 2 million shares outstanding and earings of $8 million. What is the amount of dilution in earings per share?
Bernard Corporation wants to obtain P4 million in its first public issue of common stock. After the issuance, the total market value of a stock is estimated at $10 million. At present, there are 120,000 closely-held shares. REQUIREMENTS: (a) What is the amount of new shares that must be issued to obtain the P4 million? (b) After the stock issuance, what will be the expected price per share?
Bob’s Standard Station has 15,000 shares of stock outstanding at a market price of $15 a share. The current earnings per share are $1.26. The firm has total assets of $312,000 and total liabilities of $97,500. Next week, the firm will be repurchasing $37,500 worth of stock. Ignore taxes. What will be the earnings per share after the stock repurchase?
McPherson Pharmaceutical has common stock that is trading for $75 per share. The company paid a dividend of $5.25 last year. This dividend is expected to increase at a rate of 3% per year. What is the cost of equity capital for McPherson? If McPherson issues new shares with a flotation cost of $2 per share, what is the company’s cost of new equity?(using excel formulas)
Maxwell Corp. is coming to the market with a new offering of 300,000 shares, at $25 to the public. Maxwell will receive $22 per share. The firm has 1 million shares outstanding and earnings of $6 million. What is the amount of dilution in earnings per share? Multiple Choice $2.00. $1.38. $1.77. No dilution occurs since new money is received by Maxwell.
Foster Enterprises' stock is trading for $40 per share and there are currently 19 million shares outstanding. It would like to raise $95 million. Assume its underwriter charges 8% of gross proceeds. a. How many shares must it sell? b. If it expects the stock price to drop by 1% upon announcement of the SEO, how many shares should it plan to sell? c. If all of the shares are primary shares and are sold to new investors, what percentage reduction in ownership will all of the existing shareholders experience?
West Tool Company is expected to pay a dividend of $1.0 in Year 1 and $1.3 in Year 2. Analysts expect the price of West Tool Company shares to be $18 two years from now. What is the intrinsic value of West Tool Company stock if the market capitalization rate of the company is 12% ? Round your answer to two decimal places and enter without the dollar sign.
Suppose that you own 2,700 shares of Nocash Corp. and the company is about to pay a 15% stock dividend. The stock currently sells at $110 per share.What will be the number of shares that you hold after the stock dividend is paid?
Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the 1.2 million shares that are outstanding. Shareholders require a 8% rate of return from Consolidated stock. a. What is the price of Consolidated stock? (Do not round intermediate calculations.) b. What is the total market value of its equity? (Enter your answer in millions.) Consolidated now decides to increase next year’s dividend to $20 a share, without changing its investment or borrowing plans. Thereafter the company will revert to its policy of distributing $10 million a year. c. How much new equity capital will the company need to raise to finance the extra dividend payment? (Enter your answer in millions.)
The market value balance sheet for Apple Pie Corp. reflects cash of $42,000, fixed assets of $319,000, and equity of $237,000. There are 7,500 shares of stock outstanding with a par value of $1 per share. The company has declared a dividend of $1.03 per share. The stock goes ex dividend tomorrow. Ignore any tax effects. What will be the price of the stock tomorrow morning?