Stencil, Inc., wishes to expand its facilities. The company currently has 5 million shares outstanding and no debt. The stock sells for $40 per share, but the book value per share is $7. Net income is currently $3.6 million. The new facility will cost $20 million, and it will increase net income by $280,000. 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., 32.16.)

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

a-3. Calculate the new EPS. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.)

a-4. Calculate the new stock price. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

a-5. Calculate the new market-to-book ratio. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) 

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.)

Answer rating: 100% (QA)

Lets break down the problem step by step Given data Current number of shares outstanding 5 million Current stock price 40 per share Current book value ... View the full answer