Jordan Broadcasting Company is going public at $47 net per share to the company. There also are founding stockholders that are selling part of their shares at the same price. Prior to the offering, the firm had $31 million in earnings divided over 8 million shares. The public offering will be for 4 million shares; 2 million will be new corporate shares and 2 million will be shares currently owned by the founding stockholders. a. What is the immediate dilution based on the new corporate shares that are being offered? (Do not round intermediate calculations and round your answer to 2 decimal places.) Dilution b. If the stock has a P/E of 20 immediately after the offering, what will the stock price be? (Do not round intermediate calculations and round your answer to 2 decimal places.) Stock price per share c. Should the founding stockholders be pleased with the $47 they received for their shares? O Yes O No
Jordan Broadcasting Company is going public at $47 net per share to the company. There also are founding stockholders that are selling part of their shares at the same price. Prior to the offering, the firm had $31 million in earnings divided over 8 million shares. The public offering will be for 4 million shares; 2 million will be new corporate shares and 2 million will be shares currently owned by the founding stockholders. a. What is the immediate dilution based on the new corporate shares that are being offered? (Do not round intermediate calculations and round your answer to 2 decimal places.) Dilution b. If the stock has a P/E of 20 immediately after the offering, what will the stock price be? (Do not round intermediate calculations and round your answer to 2 decimal places.) Stock price per share c. Should the founding stockholders be pleased with the $47 they received for their shares? O Yes O No
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Jordan Broadcasting Company is going public at $47 net per share to the company. There also are founding stockholders that are
selling part of their shares at the same price. Prior to the offering, the firm had $31 million in earnings divided over 8 million shares. The
public offering will be for 4 million shares; 2 million will be new corporate shares and 2 million will be shares currently owned by the
founding stockholders.
a. What is the immediate dilution based on the new corporate shares that are being offered? (Do not round intermediate calculations
and round your answer to 2 decimal places.)
Dilution
b. If the stock has a P/E of 20 immediately after the offering, what will the stock price be? (Do not round intermediate calculations
and round your answer to 2 decimal places.)
5
Stock price
per share
c. Should the founding stockholders be pleased with the $47 they received for their shares?
Ⓒ Yes
O No
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