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What is the amount of dilution in earnings per share

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Reference no: EM132873168

Question 1: All of the following are advantages of going public except

A. more funds are available to publicly-traded firms.

B. the fact that a company is public helps in bank negotiations and marketing.

C. publicly-traded stocks afford the stockholders more liquidity.

D. the firm disseminates more information to the public on corporate affairs.

Question 2: Raybac is about to go public. Its present stockholders own 500,000 shares. The new public issue will represent 700,000 shares. The shares will be priced at $25 to the public with a 5% spread. The out-of pocket costs will be $450,000. What are the net proceeds to the firm?

A. $18,750,000

B. $17,200,000

C. $18,250,000

D. $16,175,000

Question 3: Maxwell Corp. is coming to the market with a new offering of 450,000 shares of stock at $22 to the public. Maxwell will receive $19 per share. The firm has 1 million shares outstanding and earnings of $6 million. What is the amount of dilution in earnings per share?

A. $1.86

B. $1.38

C. $1.77

D. No dilution occurs since new money is received by Maxwell.

Reference no: EM132873168

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