Newdex has net income of $3,000,000 (Including the effect of expected out-of-pocket costs) and 1,000,000 shares outstanding. It needs to raise $5,000,000 in funds for a new asset. It's investment banker plans to sell an issue of common stock to the public for $40, less spread of 10%. How much must Newdex's after-tax income increase by to prevent dilution of earnings per share?
Newdex has net income of $3,000,000 (Including the effect of expected out-of-pocket costs) and 1,000,000 shares outstanding. It needs to raise $5,000,000 in funds for a new asset. It's investment banker plans to sell an issue of common stock to the public for $40, less spread of 10%. How much must Newdex's after-tax income increase by to prevent dilution of 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
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Newdex has net income of $3,000,000 (Including the effect of expected out-of-pocket costs) and 1,000,000 shares outstanding. It needs to raise $5,000,000 in funds for a new asset. It's investment banker plans to sell an issue of common stock to the public for $40, less spread of 10%. How much must Newdex's after-tax income increase by to prevent dilution of earnings per share?
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