Larry’s Tire Company Inc. has earnings of $9 million with 2,100,000 shares outstanding before a public distribution. Seven hundred thousand shares will be included in the sale, of which 400,000 are new corporate shares, and 300,000 are shares currently owned by Eric Rounds, the founder and CEO. The 300,000 shares that Eric is selling are referred to as a secondary offering, and all proceeds will go to him.The net price from the offering will be $16.50, and the corporate proceeds are expected to produce $1.8 million in corporate earnings.A:  What were the corporation’s earnings per share before the offering?B:  What are the corporation’s earnings per share expected to be after the offering?

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Asked Apr 23, 2019
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Larry’s Tire Company Inc. has earnings of $9 million with 2,100,000 shares outstanding before a public distribution. Seven hundred thousand shares will be included in the sale, of which 400,000 are new corporate shares, and 300,000 are shares currently owned by Eric Rounds, the founder and CEO. The 300,000 shares that Eric is selling are referred to as a secondary offering, and all proceeds will go to him.

The net price from the offering will be $16.50, and the corporate proceeds are expected to produce $1.8 million in corporate earnings.

A:  What were the corporation’s earnings per share before the offering?

B:  What are the corporation’s earnings per share expected to be after the offering?

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Step 1

Calculating the value of earnings per share before the offerings. We have,

Earnings per share (EPS) = Net Earnings available for stockholders / Number of share outstanding

Here,

Net earnings = $9,000,000

Number of ...

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