Jordan Broadcasting Company is going public at $40 net per share to the company.

Question

Jordan Broadcasting Company is going public at $40 net per share to the company. There also are founding stockholders that are selling part of their shares at the same price. Prior to the offering, the firm had $24 million in earnings divided over eight million shares. The public offering will be for five million shares; three million will be new corporate shares and two million will be shares currently owned by the founding stockholders.

a. What is the immediate dilution based on the new corporate shares that are being offered?

b. If the stock has a P/E of 23 immediately after the offering, what will the stock price be?

c. Should the founding stockholders be pleased with the $40 they received for their shares?

Explanation / Answer

Hi, If you like my answer, please rate my answer first and according to my answer...that way only I can earn points. Thanks a. Total no. of shares = 8 + 5 million shares = 13 million b. P/E = 23 New EPS = $(24/13) So Price = $ 23*24/13 = $42.46 c. They should not be, because the expected price > $40, so they will be getting less.

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.