I am asked to find the net proceeds for a company. It has after tax earnings of 7.5 million and currently has 2.5 million shares owned by present stockholders. The plan is to issue 600,000 shares to the public at $20 per share with a 5% spread on the offering price. There is also a $200,000 out of pocket cost to the corporation.

I then have to find earnings per share before and after the company went public.

Then I need to find the rate of return on the net proceeds that won't dilute the earnings per share when the company went public.

Finally, I have to determine what the rate of return has to be to get a 5% increase in earnings per share during the year of going public.

Can anyone help?

Sarah

In order to calculate EPS the formula is

EPS = Net income available to common shareholders/ Weighted average No. of common share holerders outstanding.

Hope this helps.

acca_123