Walker Machine Tools has 6.5 million shares of common stock outstanding. The current market price of Walker common stock is $72 per share rights-on. The company's net income this year is $22.50 million. A rights offering has been announced in which 650,000 new shares will be sold at $66.50 per share. The subscription price plus seven rights is needed to buy one of the new shares. a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round intermediate calculations and round your answers to 2 decimal places.) Earnings per share Price-earnings ratio b. What would the earnings per share be immediately after the rights offering? What would the price-earnings ratio be immediately after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins trading ex-rights.) (Do not round intermediate calculations and round your answers to 2 decimal places.) Earnings per share Price-earnings ratio
Walker Machine Tools has 6.5 million shares of common stock outstanding. The current market price of Walker common stock is $72 per share rights-on. The company's net income this year is $22.50 million. A rights offering has been announced in which 650,000 new shares will be sold at $66.50 per share. The subscription price plus seven rights is needed to buy one of the new shares. a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round intermediate calculations and round your answers to 2 decimal places.) Earnings per share Price-earnings ratio b. What would the earnings per share be immediately after the rights offering? What would the price-earnings ratio be immediately after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins trading ex-rights.) (Do not round intermediate calculations and round your answers to 2 decimal places.) Earnings per share Price-earnings ratio
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation
Section: Chapter Questions
Problem 9MC
Related questions
Question
![Walker Machine Tools has 6.5 million shares of common stock outstanding. The current market price of Walker common stock is $72
per share rights-on. The company's net income this year is $22.50 million. A rights offering has been announced in which 650,000
new shares will be sold at $66.50 per share. The subscription price plus seven rights is needed to buy one of the new shares.
a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round
intermediate calculations and round your answers to 2 decimal places.)
Earnings per share
Price-earnings ratio
b. What would the earnings per share be immediately after the rights offering? What would the price-earnings ratio be immediately
after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins
trading ex-rights.) (Do not round intermediate calculations and round your answers to 2 decimal places.)
Earnings per share
Price-earnings ratio](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F45e046d4-fa69-4128-9c77-faff31c29ebd%2Fc2b3bbf9-3e63-469a-a49e-1f60de1c5f24%2Fw17acat_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Walker Machine Tools has 6.5 million shares of common stock outstanding. The current market price of Walker common stock is $72
per share rights-on. The company's net income this year is $22.50 million. A rights offering has been announced in which 650,000
new shares will be sold at $66.50 per share. The subscription price plus seven rights is needed to buy one of the new shares.
a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round
intermediate calculations and round your answers to 2 decimal places.)
Earnings per share
Price-earnings ratio
b. What would the earnings per share be immediately after the rights offering? What would the price-earnings ratio be immediately
after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins
trading ex-rights.) (Do not round intermediate calculations and round your answers to 2 decimal places.)
Earnings per share
Price-earnings ratio
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT