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Problem:

The Houston Corp. needs to raise money for an addition to its plant. It will issue 300,000 shares of new common stock. The new shares will be priced at $60 per share with an 8.5% spread on the offer price. Registration costs will be $150,000. Presently Houston Corp has earnings of $3 million and 750,000 shares outstanding.

Required:

Question: Compute the potential dilution from this new stock issue.

Note: Show supporting computations in good form.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169148

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