Tyson Iron Works is about to go public. It currently has aftertax earnings of $5,100,000, and 3,900,000 shares are owned by the present stockholders.
The new public issue will represent 800,000 new shares. The new shares will be priced to the public at $20 per share with a 6 percent spread on the offering price. There will also be $210,000 in out-of-pocket costs to the corporation.
a. Compute the net proceeds to Tyson Iron Works. (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
Net proceeds $14,830,000
b. Compute the earnings per share immediately before the stock issue. (Do not round intermediate calculations and round your answer to 2 decimal places.)
Earnings per share $1.31
c. Compute the earnings per share immediately after the stock issue. (Do not round intermediate calculations and round your answer to 2 decimal places.)
Earnings per share $1.09
d. Determine what rate of return must be earned on the net proceeds to the corporation so there will not be a dilution in earnings per share during the year of going public. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Rate of return %
e. Determine what rate of return must be earned on the proceeds to the corporation so there will be a 10 percent increase in earnings per share during the year of going public. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Rate of return %