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The Houston Corp needs to raise money for an addition to its plant. It will issue 300,000 shares of new

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The Houston Corp needs to raise money for an addition to its plant. It will issue 300,000 shares of new common stock. The new shares will be priced at $60 per share with an 8.5% spread on the offer price. Registration costs will be $150,000. Presently Houston Corp has earnings of $3 million and 750,000 shares outstanding.
a) Compute the potential dilution from this new stock issue
b) Compute the net proceeds to Houston Corp
c) What rate of return must be earned on the net proceeds so that no dilution of earnings per share occurs?

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Foundations of Financial Management

Foundations of Financial Management

ISBN: 978-1259024979

10th Canadian edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta

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Question Posted: April 30, 2013 08:15:47
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