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Maxwell Corp. is coming to the market with a new offering of 450,000 shares of stock...

Maxwell Corp. is coming to the market with a new offering of 450,000 shares of stock at $22 to the public. Maxwell will receive $19 per share. The firm has one million shares outstanding and earnings of $6 million before recording the new issue. What is the amount of dilution in earnings per share?

$1.77

$6.00

$1.38

$1.86

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Expert Solution

Current EPS = Earning amount / No. Of outstanding shares

Current EPS = $6m /1m = $6 per share

After issue of new shares

Total o/s shares = 1000000+450000= 1450000

New EPS = 6000000/1450000= $4.14

Dilution in EPS = $6-$4.14 = $1.86

jeff jeffy answered 2 years ago
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