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EPS and P/E ratio

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R and R company currently has net income of $3 million and 1. million common shares outstanding which sell for $20 per share. R and R has decided to issue new stock to raise $4,000,000 to expand its operations. Rand R investment banker will sell the new shares for $18 per share with a spread of 7%. There will be a $60,000 registration cost.

a. Calculate the current EPS and PE ratio

b. How many shares will have to be sold to net the $4,000,000 that R and R needs?

Explain?

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Solution Summary

The solution explains how to calculate the EPS and P/E ratio

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Net income = 3,000,000
Number of shares outstanding = 1,000,000
Earnings per shares (EPS) = Net ...

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