Jordan Broadcasting Company is going public at $40 net per share to the company. There also are

Question:

Jordan Broadcasting Company is going public at $40 net per share to the company. There also are founding stockholders that are selling part of their shares at the same price. Prior to the offering, the firm had $24 million in earnings divided over eight million shares? The public offering will be for five million shares; three million will be new corporate shares and two million will be shares currently owned by the founding stockholders.

a. What is the immediate dilution based on the new corporate shares that are being offered?

b. If the stock has a P/E of 23 immediately after the offering, what will the stock price be?

c. Should the founding stockholders be pleased with the $40 they receive for their shares?

Jordan Broadcasting Company

Shares Outstanding ........ 8,000,000

Earnings ............ $24,000,000

New Stock Issue ......... 3,000,000

Price of new shares ............ $40

P/E ................... 23


Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Foundations of Financial Management

ISBN: 978-1259194078

15th edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen

Question Posted: