American Health Systems has 7,000,000 shares of stock outstanding and will report earnings of $14 million in the current year. The company is considering the issuance of 1,600,000 additional shares, which can only be issued at $20 per share.

a.Assume that American Health Systems can earn 5 percent on the proceeds. Calculate earnings per share.(Do not round intermediate calculations and round your answer to 2 decimal places.)

b.Should the new issue be undertaken based on earnings per share?

multiple choice

• Yes
• No