The Presley Corporation is about to go public. It currently has aftertax earnings of $7,500,000, and 2,500,000 shares are owned by the present stockholders (the Presley family). The new public issue will represent 600,000 new shares. The new shares will be priced to the public at $20 per share, with a 5 percent spread on the offering price. There will also be $200,000 in out-of-picket costs to the corporation.

a. Compute the net proceeds to the Presley Corporation

Net Proceed = 2,500,000 shares x $20 x 0.95 - $200,000
Net Proceed = $47,300,000

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