2) The company wishes to raise $100 million by issuing stock. The current market price is $15 per share, however, if issued the price will drop to $12.50 per share. How many shares will need to be issued if under writing is 5% per share? If there are currently 600,000 shares outstanding, with an EPS of .25 cents per share, how will this affect the EPS if net income remains unchanged? If the company has a standard practice of paying a dividend of .10 cents per share, once a year, what will be the change in dividends paid? Assuming an effective tax rate of 30% what would be the tax savings?

To find out how many shares need to be issued to raise $100 million, we need to determine the difference between the current market price and the issue price. Let's calculate it step by step:

1) Calculate the price drop per share:
Price drop = Current market price - Issue price
= $15 - $12.50
= $2.50 per share

2) Determine the underwriting cost per share:
Underwriting cost per share = 5% of the issue price
= 5% of $12.50
= $0.625 per share

3) Calculate the net proceeds per share:
Net proceeds per share = Issue price - Underwriting cost per share
= $12.50 - $0.625
= $11.875 per share

4) Determine the number of shares needed to raise $100 million:
Number of shares = Amount to be raised / Net proceeds per share
= $100,000,000 / $11.875
≈ 8,421,053 shares

Therefore, approximately 8,421,053 shares need to be issued to raise $100 million.

Now, let's move on to the second part of the question regarding the impact on EPS if net income remains unchanged.

Currently, there are 600,000 shares outstanding, and the EPS is $0.25 per share. To assess the impact on EPS, we need to calculate the new EPS after issuing additional shares:

1) Calculate the total earnings before issuing new shares:
Total earnings = EPS * Number of shares
= $0.25 * 600,000
= $150,000

2) Calculate the new EPS after issuing additional shares:
New EPS = Total earnings / (Number of shares + Number of newly issued shares)
= $150,000 / (600,000 + 8,421,053)
≈ $0.01689 per share

Therefore, the new EPS, if net income remains unchanged, would be approximately $0.01689 per share.

Moving on to the next part of the question concerning the change in dividends paid.

The company currently pays a dividend of $0.10 per share once a year. To determine the change in dividends paid, we will compare the number of shares outstanding before and after issuing new shares:

1) Calculate the current total dividends paid:
Total dividends paid = Dividend per share * Number of shares outstanding
= $0.10 * 600,000
= $60,000 per year

2) Calculate the new total dividends paid after issuing additional shares:
New total dividends paid = Dividend per share * (Number of shares outstanding + Number of newly issued shares)
= $0.10 * (600,000 + 8,421,053)
= $1,002,105.30 per year

Therefore, the change in dividends paid would be an increase from $60,000 to approximately $1,002,105.30 per year.

Lastly, let's calculate the tax savings assuming an effective tax rate of 30%.

1) Calculate the current tax payment:
Current tax payment = Net income * Tax rate
= $150,000 * 30%
= $45,000

2) Calculate the new tax payment after issuing additional shares:
New tax payment = (Net income + (Number of newly issued shares * EPS)) * Tax rate
= ($150,000 + (8,421,053 * $0.01689)) * 30%
≈ $76,368

Therefore, the tax savings would be approximately $45,000 - $76,368 = -$31,368 (a decrease in tax expense).