7)

Walker Machine Tools has 6.2 million shares of common stock outstanding. The current market price of Walker common stock is $66 per share rights-on. The companys net income this year is $21.00 million. A rights offering has been announced in which 620,000 new shares will be sold at $60.50 per share. The subscription price plus five 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.)

Earnings per share	$
Price-earnings ratio

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.)

Earnings per share	$
Price-earnings ratio