Newdex Has Net Income of $3,000,000 and 1,000,000 Shares Outstanding

question 89

Multiple Choice

Newdex has net income of $3,000,000 and 1,000,000 shares outstanding. It needs to raise $5,000,000 in funds for a new asset. Its investment banker plans to sell an issue of common stock to the public for $40, less a spread of 10%. How much must Newdex's after-tax income increase to prevent dilution of EPS?

• A) $40,000
• B) $416,667
• C) $350,000
• D) None of these

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