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BUSI 320 Connect Homework 7 Liberty University Complete Answer
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BUSI 320 Connect Homework 7 Liberty University Complete Answer

 

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Question 8

American Health Systems currently has 6,300,000 shares of stock outstanding and will report earnings of $18 million in the current year. The company is considering the issuance of 1,100,000 additional shares that will net $50 per share to the corporation.

a. What is the immediate dilution potential for this new stock issue? (Do not round intermediate calculations and round your answer to 2 decimal places.)

b-1. Assume that American Health Systems can earn 12 percent on the proceeds of the stock issue in time to include them in the current year’s results. Calculate earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.)

b-2. Should the new issue be undertaken based on earnings per share?

Question 9

Assume Sybase Software is thinking about three different size offerings for issuance of additional shares.

What is the percentage underwriting spread for each size offer? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Question 10

The Wrigley Corporation needs to raise $37 million. The investment banking firm of Tinkers, Evers & Chance will handle the transaction.

a. If stock is utilized, 1,700,000 shares will be sold to the public at $23.80 per share. The corporation will receive a net price of $22.00 per share. What is the percentage underwriting spread per share? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. If bonds are utilized, slightly over 37,400 bonds will be sold to the public at $1,003 per bond. The corporation will receive a net price of $998 per bond. What is the percentage of underwriting spread per bond? (Relate the dollar spread to the public price.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Question 11

Kevin’s Bacon Company Inc. has earnings of $5 million with 2,400,000 shares outstanding before a public distribution. Six hundred thousand shares will be included in the sale, of which 300,000 are new corporate shares, and 300,000 are shares currently owned by Ann Fry, the founder and CEO. The 300,000 shares that Ann is selling are referred to as a secondary offering and all proceeds will go to her.

The net price from the offering will be $19.50 and the corporate proceeds are expected to produce $1.5 million in corporate earnings.

a. What were the corporation’s earnings per share before the offering? (Do not round intermediate calculations and round your answer to 2 decimal places.)

b. What are the corporation’s earnings per share expected to be after the offering? (Do not round intermediate calculations and round your answer to 2 decimal places.)

Question 12

Becker Brothers is the managing underwriter for a 1.75-million-share issue by Jay’s Hamburger Heaven. Becker Brothers is “handling” 7 percent of the issue. Its price is $27 per share and the price to the public is $29.20.

Becker also provides the market stabilization function. During the issuance, the market for the stock turned soft, and Becker is forced to purchase 45,000 shares in the open market at an average price of $28.30. They later sell the shares at an average value of $28.00.

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BUSI 320 Connect Homework 7 Liberty University Complete Answer
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