J&J Inc. has decided to issue new stock to raise $9,000,000 to expand its operations. J&J currently has 2.6 million common shares outstanding which sell for $29/share and net income of $4.1 million. J&J's investment dealer will sell the stock for $27 with a spread of 5%. There will be a $75,000 registration cost. A) Calculate current EPS and PE ratio. B) How many shares will have to be sold to net $4.1 million? C) Calculate new EPS and stock price immediately after the sale if the PE ratio remains constant.
J&J Inc. has decided to issue new stock to raise $9,000,000 to expand its operations. J&J currently has 2.6 million common shares outstanding which sell for $29/share and net income of $4.1 million. J&J's investment dealer will sell the stock for $27 with a spread of 5%. There will be a $75,000 registration cost. A) Calculate current EPS and PE ratio. B) How many shares will have to be sold to net $4.1 million? C) Calculate new EPS and stock price immediately after the sale if the PE ratio remains constant.
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 12P
Related questions
Question
M4
![J&J Inc. has decided to issue new stock to raise $9,000,000 to expand its operations.
J&J currently has 2.6 million common shares outstanding which sell for $29/share
and net income of $4.1 million. J&J's investment dealer will sell the stock for $27
with a spread of 5%. There will be a $75,000 registration cost.
A) Calculate current EPS and PE ratio.
B) How many shares will have to be sold to net $4.1 million?
C) Calculate new EPS and stock price immediately after the sale if the PE ratio
remains constant.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fee9d76d9-28f0-44e1-8afe-3ea96db0605a%2Ffce38087-28cf-41d7-9d56-2c53208aa370%2Fvv7j148_processed.jpeg&w=3840&q=75)
Transcribed Image Text:J&J Inc. has decided to issue new stock to raise $9,000,000 to expand its operations.
J&J currently has 2.6 million common shares outstanding which sell for $29/share
and net income of $4.1 million. J&J's investment dealer will sell the stock for $27
with a spread of 5%. There will be a $75,000 registration cost.
A) Calculate current EPS and PE ratio.
B) How many shares will have to be sold to net $4.1 million?
C) Calculate new EPS and stock price immediately after the sale if the PE ratio
remains constant.
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