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 after tax income increase to prevent dilution of ...

b 237500 Calculation of Newdexs aftertax income increase to prevent dilution o ...

Newdex has net income of $2,500,000 and 1,000,000 shares outstanding. It needs to raise $3,610,000 in funds

Question:

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 to the public for $40, less a spread of 5%. How much must Newdex's after tax income increase to prevent dilution of EPS?
a) $40,000
b) $237,500
c) $250,000
d) None of the above

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...