Flyrite Company Currently Has Net Income of $3 Million and 1.5

question 43

Essay

Flyrite Company currently has net income of $3 million and 1.5 million common shares outstanding which sell for $20/share.Flyrite has decided to issue new stock to raise $4,000,000 to expand its operations.Flyrite's investment dealer will sell the stock for $18 with a spread of 7%.There will be a $60,000 registration cost.
A)Calculate current EPS and PE ratio.
B)How many shares will have to be sold to net $4 million?
C)Calculate new EPS and stock price immediately after the sale if the PE ratio remains constant.

• A)Calculate current EPS and PE ratio.
• B)How many shares will have to be sold to net $4 million?
• C)Calculate new EPS and stock price immediately after the sale if the PE ratio remains constant.

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Definitions:

Simplify

The process of altering an expression or equation to make it easier to work with, often by combining like terms or applying mathematical properties.

Ratio

A ratio is a relationship between two numbers indicating how many times the first number contains the second or how these two quantities are proportionally related.

Circular Pool

A pool shaped in a perfect circle, often used in geometry to discuss circumference, area, and other circular measurements.

Rectangular Pool

A swimming pool shaped like a rectangle, with two pairs of parallel sides and four right angles.