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Linda_us, Finance, Accounts & Homework Tutor
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The Tims Corporation expects earnings of $8,000,000 in the

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The Tims Corporation expects earnings of $8,000,000 in the current year on 6,000,000 shares of common stock. The company is considering the effects on expected earnings of issuing an additional 2,000,000 shares of common stock.
(a) What will be the initial dilution in earnings per share if the new stock is issued?
(b) If the firm sells the sock for a net price of $23 per share and is able to earn 60% after tax on the proceeds before the end of the year, what will be the earnings per share?
Submitted: 8 years ago.
Category: Homework
Expert:  Linda_us replied 8 years ago.
HICustomerbr />
(a) Current EPS is 8,000,000/6,000,000= $1.33

After issue of 2,000,0000 additional share
EPS=8,000,000/(6,000,000+2,000,000)=$1 Per share

(b) So additional proceed genarated=23*2,000,000=$46,000,000

Increase in Earning (After Tax) = 46,000,000*60%=27,600,000

Earning Per share=($8,000,000+27,600,000) / (2,000,000+6,000,000)
EPS= $4.45


Customer: replied 8 years ago.
Can you include an explanation/formulas used? Thanks!
Expert:  Linda_us replied 8 years ago.

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