S$15-09$ Dilution $[$LO$3]$

Marker, Incorporated, wishes to expand its facilities. The company currently has $5$ million

shares outstanding and no debt. The stock sells for $$64$ per share, but the book value

per share is $$19.$ Net income is currently $$12\mathrm{.}2$ million. The new facility will cost $$28$

million, and it will increase net income by $$775,000.$ Assume a constant price$-$earnings

ratio.

a$-1.$ Calculate the new book value per share. $($Do not round intermediate calculations

and round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

a$-2.$ Calculate the new total earnings. $($Do not round intermediate calculations and

enter your answer in dollars, not millions, rounded to the nearest whole number,

e$.$g$.,1,234,567.$

a$-3.$ Calculate the new EPS. $($Do not round intermediate calculations and round your

answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

a$-4.$ Calculate the new stock price. $($Do not round intermediate calculations and round

your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

a$-$ Calculate the new market$-$to$-$book ratio. $($Do not round intermediate calculations

and round your answer to $4$ decimal places, e$.$g$.,32\mathrm{.}1616.)$

b$.$ What would the new net income for the company have to be for the stock price to

remain unchanged? $($Do not round intermediate calculations and enter your

answer in dollars, not millions, rounded to the nearest whole number, e$.$g$.,$

$1,234,567.)$