Tyson Iron Works is about to go public. It currently has aftertax earnings of $5,200,000, and...

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Tyson Iron Works is about to go public. It currently hasaftertax earnings of $5,200,000, and 4,100,000 shares are owned bythe present stockholders. The new public issue will represent700,000 new shares. The new shares will be priced to the public at$25 per share with a 5 percent spread on the offering price. Therewill also be $200,000 in out-of-pocket costs to thecorporation.
a. Compute the net proceeds to Tyson IronWorks. (Do not round intermediate calculations and roundyour answer to the nearest whole dollar.)


b. Compute the earnings per share immediatelybefore the stock issue. (Do not round intermediatecalculations and round your answer to 2 decimal places.)


c. Compute the earnings per share immediatelyafter the stock issue. (Do not round intermediatecalculations and round your answer to 2 decimal places.)


d. Determine what rate of return must be earnedon the net proceeds to the corporation so there will not be adilution in earnings per share during the year of going public.(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places.)


e. Determine what rate of return must be earnedon the proceeds to the corporation so there will be a 10 percentincrease in earnings per share during the year of going public.(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places.)

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4.2 Ratings (634 Votes)

a Calculation of net proceeds to Tyson Iron works Sale price 17500000 70000025 Less Spread 5 875000 175000005 Less Out of pocket costs 200000 Net proceeds 16425000 b Earnings per share Net incomeNumber of shares outstanding See Answer

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Tyson Iron Works is about to go public. It currently hasaftertax earnings of $5,200,000, and 4,100,000 shares are owned bythe present stockholders. The new public issue will represent700,000 new shares. The new shares will be priced to the public at$25 per share with a 5 percent spread on the offering price. Therewill also be $200,000 in out-of-pocket costs to thecorporation.a. Compute the net proceeds to Tyson IronWorks. (Do not round intermediate calculations and roundyour answer to the nearest whole dollar.) b. Compute the earnings per share immediatelybefore the stock issue. (Do not round intermediatecalculations and round your answer to 2 decimal places.) c. Compute the earnings per share immediatelyafter the stock issue. (Do not round intermediatecalculations and round your answer to 2 decimal places.) d. Determine what rate of return must be earnedon the net proceeds to the corporation so there will not be adilution in earnings per share during the year of going public.(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places.) e. Determine what rate of return must be earnedon the proceeds to the corporation so there will be a 10 percentincrease in earnings per share during the year of going public.(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places.)