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After-tax income increase to prevent dilution of EPS

Newdex has net income of $2,500,000 and 1,000,000 shares outstanding. It needs to raise $3,610,000 in funds for a new asset. Its investment banker plans to sell an issue of common stock to the public for $40, less a spread of 5%. How much must Newdex's aftertax income increase to prevent dilution of EPS?

a) $40,000
b0 $237,500
c)$250,000
d) none of the above

Solution Preview

Newdex has net income of $2,500,000 and 1,000,000 shares outstanding. It needs to raise $3,610,000 in funds for a new asset. Its investment banker plans to sell an issue of common stock to the public for $40, less a spread of 5%. How ...

Solution Summary

This gives the steps to calculate after-tax income increase to prevent dilution of EPS

$2.19