Walker Machine Tools has 6.7 million shares of common stock
outstanding. The current market price of Walker common stock is $76
per share rights-on. The company’s net income this year is $23.50
million. A rights offering has been announced in which 670,000 new
shares will be sold at $70.50 per share. The subscription price
plus nine rights is needed to buy one of the new shares.
a. What are the earnings per share and
price-earnings ratio before the new shares are sold via the rights
offering? (Do not round intermediate calculations and round
your answers to 2 decimal places.)
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| Earnings per share |
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| Price-earnings ratio |
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b. What would the earnings per share be
immediately after the rights offering? What would the
price-earnings ratio be immediately after the rights offering?
(Assume there is no change in the market value of the stock, except
for the change when the stock begins trading ex-rights.)
(Do not round intermediate calculations and round your
answers to 2 decimal places.)
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| Earnings per share |
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| Price-earnings ratio |
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