$**$STOCK ISSUE$**$

Use the following information to answer the next four questions:

The Houston Corp, needs to raise money for an addition to its plant. It will issue $300,000$ shares of new common stock priced at $$60$ per share. There will be $8\mathrm{.}5\%$ spread on the offer price. Registration costs of $$150,000$ will be paid out of the proceeds received from the new share issue. Presently Houston Corp. has earnings of $$3$ million and $750,000$ shares outstanding.

$1/$The potential dilution of EPS from this new share issue is:

a$.$$$2\mathrm{.}86$

b$.$$$3\mathrm{.}00$

c$.$$$4\mathrm{.}00$

d$.$$$1\mathrm{.}14$

$2/$ The net price per share after spread $($before registration costs$)$ to Houston is:

a$.$$$58\mathrm{.}00$

b$.$$$5\mathrm{.}10$

c$.$$$54\mathrm{.}90$

d$.$$$56\mathrm{.}20$

$3/$Net Proceeds to Houston Corp. are:

a$.$$$150,000,000$

b$\mathrm{.}16,320,000$

c$.$$$182,750,000$

d$.$$$15,432,000$

$4/$For earnings per share NOT to be diluted, the return on net proceeds is required to be:

a$\mathrm{.}8\mathrm{.}92\%$

b$\mathrm{.}12\mathrm{.}14\%$

c$\mathrm{.}5\mathrm{.}34\%$

d$\mathrm{.}7\mathrm{.}35\%$