Midland Corporation has a net income of $17 million and 5 million shares outstanding. Its common stock is currently selling for $43 per share. Midland plans to sell common stock to set up a major new production facility with a net cost of $26,600,000. The production facility will not produce a profit for one year, and then it is expected to earn a 14 percent return on the investment. Wood and Gundy, an investment dealer, plans to sell the issue to the public for $40 per share, with a spread of 5 percent.
a. How many shares of stock must be sold to net $26,600,000? (Note: No out-of-pocket costs must be considered in this problem.) Number of shares
b. Not available in Connect.
c. What are the EPS and the P/E ratio before the issue (based on a stock price of $43)? What will be the price per share immediately after the sale of stock if the P/E stays constant? (Round the intermediate calculations and the final answer to 2 decimal places. Enter the answers in dollars not in millions.) EPS before offering $ P/E ratio X EPS after offering $ Price $
d. Compute the EPS and the price (P/E stays constant) after the new production facility begins to produce a profit. (Round the intermediate calculations and the final answer to 2 decimal places. Enter the answers in dollars not in millions.) EPS after contribution $ Price $
