The Presley Corporation is about to go public. It currently has aftertax earning

Question

The Presley Corporation is about to go public. It currently has aftertax earnings of $5,700,000 and 3,100,000 shares are owned by the present stockholders (the Presley family). The new public issue will represent 800,000 new shares. The new shares will be priced to the public at $35 per share, with a 4 percent spread on the offering price. There will also be $280,000 in out-of-pocket costs to the corporation.

(a) Compute the net proceeds to the Presley Corporation. (Omit the "$" sign in your response.)

Net proceeds $

(b) Compute the earnings per share immediately before the stock issue. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Earnings per share $

(c)

Compute the earnings per share immediately after the stock issue. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Earnings per share $

(d)

Determine what rate of return must be earned on the net proceeds to the corporation so there will not be a dilution in earnings per share during the year of going public. (Round your intermediate and final answer to 2 decimal places. Omit the "%" sign in your response.)

Rate of return %

(e)

Determine what rate of return must be earned on the proceeds to the corporation so there will be a 5 percent increase in earnings per share during the year of going public. (Round your intermediate and final answer to 2 decimal places. Omit the "%" sign in your response.)

Rate of return %

Explanation / Answer

a) 56500 b)9800 pr share c)1482 per share d)66 .9% e)23%

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