Vansteelandt Inc

question 8

Multiple Choice

Vansteelandt Inc.has net income of $4,000,000 and 1,000,000 shares outstanding.Its common stock is currently selling for $50 per share.It needs to raise $2,000,000 in funds for a new asset.Its investment dealer plans to sell an issue of common stock to the public for $48 for a spread of 4% on offer price.How much must Vansteelandt's after tax income increase to prevent dilution of EPS?

• A) $173,612
• B) $80,000
• C) $41,667
• D) $40,000

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Definitions:

Net Income

The total profit of a company after subtracting all expenses from total revenues, reflecting the company's financial performance over a given period.

Contribution Margin

The amount by which a product's sales price exceeds its total variable costs, used to cover fixed costs and generate profit.

Variable Costing

Variable costing is an accounting method that includes only variable production costs in the cost of goods sold and inventory valuation.

Net Income

This is the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.