Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 15, Problem 3P
American Health Systems currently has 6,400,000 shares of stock outstanding and will report earnings of
a. What is the immediate dilution potential for this new stock issue?
b. Assume that American Health Systems can earn 9 percent on the proceeds of the stock issue in time to include them in the current year’s results. Calculate earnings per share. Should the new issue be undertaken based on earnings per share?
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Tommy’s Automotive Group currently has 6,400,000 shares of stock outstanding and will report earnings of $10 million in the current year. The company is considering the issuance of 1,700,000 additional shares that will net $30 per share to the corporation.
A. What is the immediate dilution potential for this new stock issue?
B. Assume that Tommy’s Automotive Group can earn 9 percent on the proceeds of the stock issue in time to include them in the current year’s results. Calculate earnings per share. Should the new issue be undertaken based on earnings per share?
S
American Health Systems currently 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 that will net $40 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.)
Dilution
b-1. Assume that American Health Systems can earn 15 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.)
Earnings per share
per share
b-2. Should the new issue be undertaken based on earnings per
O Yes
O No
share?
American Health Systems currently has 6,200,000 shares of stock outstanding and will report earnings of
$22 million in the current year. The company is considering the issuance of 1,900,000 additional shares,
which can only be issued at $16 per share.
a. Assume that American Health Systems can earn 9 percent on the proceeds. Calculate earnings per
share.
Note: 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
O No
Chapter 15 Solutions
Foundations of Financial Management
Ch. 15 - Prob. 1DQCh. 15 - Prob. 2DQCh. 15 - Prob. 3DQCh. 15 - Prob. 4DQCh. 15 - Prob. 5DQCh. 15 - Prob. 6DQCh. 15 - Prob. 7DQCh. 15 - Prob. 8DQCh. 15 - Prob. 9DQCh. 15 - Prob. 10DQ
Ch. 15 - What is privatization? (LO15-5)Ch. 15 - Louisiana Timber Company currently has 5 million...Ch. 15 - The Hamilton Corporation Company has 4 million...Ch. 15 - American Health Systems currently has 6,400,000...Ch. 15 - Using the information in Problem 3, assume that...Ch. 15 - Jordan Broadcasting Company is going public at 50...Ch. 15 - Prob. 6PCh. 15 - Tiger Golf Supplies has 25 million in earnings...Ch. 15 - Prob. 8PCh. 15 - Walton and Company is the managing investment...Ch. 15 - Prob. 10PCh. 15 - Prob. 11PCh. 15 - Prob. 12PCh. 15 - Prob. 13PCh. 15 - Prob. 14PCh. 15 - Prob. 15PCh. 15 - Prob. 16PCh. 15 - Prob. 17PCh. 15 - Midland Corporation has a net income of 19...Ch. 15 - Prob. 19PCh. 15 - Prob. 20PCh. 15 - Prob. 21PCh. 15 - Prob. 22P
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