CORPORATE FINANCE >C<
CORPORATE FINANCE >C<
11th Edition
ISBN: 9781308875637
Author: Ross
Publisher: MCG/CREATE
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Chapter 20, Problem 12QP
Summary Introduction

To determine: The return on equity on the investment on the given conditions, the net present value of the investment and whether dilution takes place or not.

Dilution:

The dilution is a process or action where the ownership percentage of a shareholder gets reduced due to the issue of new shares. As the number of outstanding shares gets increased, the par value of the company gets decreased.

Return on Equity:

The return on equity refers to the part of net income where the company gets profits from the amount invested by the shareholders. The return on equity is a measure of the profitability of a company.

Earning per share:

The earning per share is a measure of the profitability of a company. It represents the portion of the profit of the company which is allocated to each outstanding share of the stock.

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