a. To calculate the immediate dilution based on the new corporate shares that are being offered, we need to compare the earnings per share (EPS) before and after the offering.
Before the offering:
Earnings = $48 million
Number of shares = 12 million
EPS = Earnings / Number of shares = $48 million / 12 million = $4 per share
After the offering:
Earnings = $48 million
Number of shares = 12 million (existing shares) + 4 million (new corporate shares) = 16 million shares
EPS = Earnings / Number of shares = $48 million / 16 million = $3 per share
Dilution per share = EPS before offering - EPS after offering = $4 - $3 = $1 per share
Therefore, the immediate dilution based on the new corporate shares being offered is $1 per share.
b. To calculate the stock price after the offering, we need to use the price-to-earnings (P/E) ratio.
P/E ratio = Stock price / Earnings per share
Given the P/E ratio of 20, we can set up the equation:
20 = Stock price / $3
Stock price = 20 * $3 = $60 per share
Therefore, if the stock has a P/E of 20 immediately after the offering, the stock price will be $60 per share.
c. To determine if the founding stockholders should be pleased with the $50 they received for their shares, we need to compare the price they received to the stock price after the offering.
Given that the stock price after the offering is $60 per share, the founding stockholders sold their shares at $50 per share. Therefore, they sold their shares at a lower price than what the stock is currently valued at.
So, the founding stockholders might not be completely pleased with the $50 they received for their shares, as they could have potentially sold them for a higher price if they had waited until after the offering.