Explore BrainMass

Explore BrainMass

    Effect of Cash received from issue & invested on EPS

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    No. of Outstanding share before issue = 4,000,000
    No. of Outstanding share after issue 4,000,000 + 500,000 = 4,500,000 (500k shares issued @ 31 per share)

    EPS before issue = $1.75 ; EPS after issue = $1.56

    If the 500,000 shares can only be issues at $31 per share and the company can earn 6% on the net proceeds, should they still proceed with this issue based upon EPS?

    © BrainMass Inc. brainmass.com June 4, 2020, 1:09 am ad1c9bdddf
    https://brainmass.com/business/accounting/effect-cash-received-issue-invested-eps-381778

    Solution Preview

    Answer -

    Net Income = 7,000,00 + 6% * (500000*31)
    = 7,000,000 + ...

    Solution Summary

    The solution calculates the effect of on EPS when Cash received from issue of share & invested in interest instruments.

    $2.19

    ADVERTISEMENT