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Anton Corporation, a manufacturer of radar control equipment, is planning to sell its shares to the general public for the first time. The firm’s investment banker is working with Anton Corporation in determining the number of items. Information on the Anton Corporation follows Anton CorporationIncome statement for the year 200xSales (all on credit) ………………………………. $22,428,000Costs of goods sold ……….. 16,228,000Gross profit ……………. 6,200,000Selling and administrative expenses ….. 2,659,400Operating profit …………. 3,540,600Interest expense ………… 370,600Net income before taxes ………… 3,170,000Taxes ……………… 1,442,000Net income …………… $1,728,000Balance SheetAs of December 31, 200xAssetsCash ……………… $150,000Marketable securities …………. 100,000Accounts receivable ………… 2,000,000Inventory ……………. 3,800,000Total current assets …………. 6,050,000Net plant and equipment ………. 6,750,000Total assets ………….. 12,800,000Liabilities and stockholders’ equity accounts payable …………. $1,000,000Notes payable ………….. 1,200,000Total current liabilities ………. 2,200,000Long term liabilities ……….. 2,380,000Total liabilities …………. 4,580,000Common stock (1,200,000 shares at $1 par) … 1,200,000Capital paid in excess of par ……… 2,800,000Retained earnings …………. 4,220,000Total stockholders’ equity ……… 8,220,000Total liabilities and stockholders’ equity .. 12,800,000The new public offering will be at 10 times the earnings per share

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a. Assume that 500,000 new corporate shares will be issued to the general public. What will earnings per share be immediately after the public offering? (Round to two places to the right of the decimal point.) Based on the price-earnings ratio of 10, what will the initial price of the stock be? Use earnings per share after the distribution in the calculation. b. Assuming an underwriting spread of 7 percent and out of the pocket cost of $150,000, what will net proceeds to the corporation be? c. What return must the corporation earn on the net proceeds to equal the earnings per share before the offering? How does this compare with the current return on the total assets on the balance sheet? d. Now assume that, of the initial 500,000 share distribution, 250,000 shares belong to current stockholders and 250,000 are new corporate shares, and these will be added to the 1,200,000 corporate shares currently outstanding. What will earnings per share be immediately after public offering? What will the initial market price of the stock be? Assume a price-earnings ratio of 10 and use earnings per share after the distribution in the calculation e. Assuming an underwriting spread of 7 percent and out of pocket costs of $150,000 what will net proceeds to the corporate be? f. What return must the corporation now earn on the net proceeds to equal earnings per share before the offering? How does this compare with the current return on the total assets on the balance sheet?  Get Accounting Help Today