Response to the following problem:
Triangle Media Group, Inc., issued 15,000 shares of $0.10 par value common stock at a price of $50 per share on January 1, 2007. The proceeds will be used to invest in a project that is expected to generate a 12% annual return. The base earnings per share without the impact of the new investment is $4.00 for each of the 135,000 common shares. Ignore income taxes.
a. Determine the estimated earnings per share for 2007, including the impact of the new investment.
b. Assume the return on the investment was only 4%. What would be the impact on earnings per share under this assumption?