# Finance

Newdex has net income of \$2,500,000 and 1,000,000 shares outstanding. It needs to raise \$3,610,000 in funds for a new asset. Its investment banker plans to sell an issue of common stock to the public for \$40 per share, less a spread of 5%. How much must Newdex's after-tax income increase to prevent dilution of EPS?

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1. EPS=NI/#shares Outstanding
2,500,000/1,000,000=2.5 ratio
1,000,000(1.05)+(3,610,000/40)=
1050000+90250=1140250 shares
2.5=NI/1140250
NI=2850625
-2500000
Increase in NI=350625

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2. Miles Metals recently reported \$11,500 of sales, \$4,000 of operating costs other than depreciation, and \$1,500 of depreciation. The company had no amortization charges, it had \$3,500 of bonds that carry a 6% interest rate, and its federal-plus-state income tax rate was 38%. What was the firm's net income after taxes? The company uses the same depreciation for tax and stockholder reporting.

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