Solar Energy Corp. has $4million in earnings with 4 million shares outstanding. Investment bankers think the stock can justify P/E ratio of 21. Assume the underwriting spread is 5 percent. What should the price to the public be?
The price to the public will be $22.11.
Hence, the offer price to the public will be $22.11.
Using the information in Problem 3, assume that American Health Systems’ 1,700,000 additional share can only be issued at $18 per share.
a. Assume that American Health Systems can earn 6 percent on the proceeds. Calculate earnings per share.
b. Should the new issue be undertaken based on earnings per share?
94% of StudySmarter users get better grades.Sign up for free