Determine the immediate dilution effect

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Reference no: EM1349361

The Hub corporation currently has 4 million shares of stocks outstanding and will report earnings of 6 million in the current year. The company is considering the issuance of 1 million additional shares that will net $30 per share to the corporation.

1. What is the immediate dilution effect for this new stock issue?

2. Assume the company can earn 10.5 % on the proceeds of the stock issue in time to include them in the current years' results.

3. If the million additional shares can only be issued at $23 and the company can place 6% on the proceeds, should the new issue be undertaken based on the EPS?

Reference no: EM1349361

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