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Question: Dawson Motor Company has 6 million shares outstanding with total earnings of $12 million. The company is considering issuing 1.5 million new shares.

a. What will be the immediate dilution in earnings per share?

b. If the new shares can be sold at $25 per share and the proceeds will earn 12 percent, will there still be dilution? Based on the new EPS, should the new shares be issued?

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Category:- Basic Finance
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