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just Excrcise 16: Relation of rights to EPS and the price-carnings ratio Walker Machine...

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Excrcise 16: Relation of rights to EPS and the price-carnings ratio Walker Machine Tools has 7 million shares of common stock outstanding. The current market price of Walker common stock is S82 per share rights-on. The company's net income this year is $25 million. A rights offering has been announced in which 700,000 new shares will be sold at $76.50 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? b. What would the earnings per share be immediately after the rights offering? What would the price-carnings 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.) Round all answers to two places after the decimal point. Exercise 19: Preferred stock dividends in arrears Robbins Petroleum Company is four years in arrears on cumulative preferred stock dividends. There are 690,000 preferred shares outstanding, and the annual dividend is $6.50 per share. The

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