American Health Systems has 7,200,000 shares of stock outstanding and will report earnings of $12 million in the current year. The company is considering the issuance of 1,300,000 additional shares, which can only be issued at $22 per share.
a. Assume that American Health Systems can earn 10 percent on the proceeds. Calculate earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.)
Earnings per share =
b. Should the new issue be undertaken based on earnings per share?
yes or no
Solar Energy Corp. has $9 million in earnings with three million shares outstanding. Investment bankers think the stock can justify a P/E ratio of 19. Assume the underwriting spread is 10 percent.
What should the price to the public be? (Do not round intermediate calculations and round your answer to 2 decimal places.)