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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?

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Solution Summary

This solution explains:

1) How to calculate the dilution affect on a stock based on new stock being issued.
2) How to calculate earnings per share of a stock.

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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?

You can find the initial earnings per ...

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