Business

FinanceQ&A LibraryTommy’s Automotive Group currently has 6,400,000 shares of stock outstanding and will report earnings of $10 million in the current year. The company is considering the issuance of 1,700,000 additional shares that will net $30 per share to the corporation. A. What is the immediate dilution potential for this new stock issue? B. Assume that Tommy’s Automotive Group can earn 9 percent on the proceeds of the stock issue in time to include them in the current year’s results. Calculate earnings per share. Should the new issue be undertaken based on earnings per share?Question

**Tommy’s Automotive Group currently has 6,400,000 shares of stock outstanding and will report earnings of $10 million in the current year. The company is considering the issuance of 1,700,000 additional shares that will net $30 per share to the corporation.**

A. What is the immediate dilution potential for this new stock issue?

B. Assume that Tommy’s Automotive Group can earn 9 percent on the proceeds of the stock issue in time to include them in the current year’s results. Calculate earnings per share. Should the new issue be undertaken based on earnings per share?

1 Rating

Find answers to questions asked by student like you

Q: Use the continuous compound interest formula to find the indicated value P = $2,570; r = 3.14%; t = ...

A: Continuous Compound Interest Method:The continuous compound interest method is the method of calcula...

Q: A retail coffee company is planning to open 90 new coffee outlets that are expected to generate $15....

A: Expected cash flows at the end of year 1, C1 = $ 15.6 mnGrowth rate in the cash flows, g = 3.4% in p...

Q: You can afford monthly deposits of $100 into an account that pays 5.3% compounded monthly. How long ...

A: Compounded Interest: It is the method for computing interest at the initial amount of prin...

Q: Which are the main legislative acts governing the Mergers & Aquisition activities in the United ...

A: Mergers and Acquisitions (M&A) are transactions of uniting two or more companies into one. The m...

Q: Micro-Technologies is a Bio Tech research firm that is conducting research on a cure for Aids. Their...

A: Step1: Calculating the value of after-tax cash outflow under lease arrangement. We have,Lease paymen...

Q: You are considering a project with an initial cost of $7,800. What is the payback period for this pr...

A: Calculation of Payback Period:Using Excel Spreadsheet:

Q: The price of a certain security follows a geometric Brownian motion with drift parameter mu=.05 and ...

A: Part (a)We will evaluate the risk neutral valuation of the call option using the Black Scholes Model...

Q: Consider Commodity Z, which has both exchange-traded futures and option contracts associated with it...

A: There is a specific relationship that exists between the call premium and the put premium for an un...

Q: What is the current price of a zero-coupon bond with a 7 percent yield to maturity that matures in 2...

A: Two assumptions are required before we proceed to calculate the price of the zero coupon bond:1. Let...