Crestwood Ltd., a computer hardware company with sales of $28 million and a net profit margin of 6.5% is considering an expansion. Management estimates the expansion would result in sales growth of 10% yet would require raising $5 million in equity. Crestwood's share price closed yesterday at $15.25, and its underwriter believes it could sell the equity offering at $14.75. The underwriter's commission is 6.0%. There are currently 3.5 million shares outstanding.

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1. What are the current earnings per share (EPS)? (1 mark)

1. What would the EPS be after the equity issue? Assume the expansion occurs after the share issue. (4 marks)

1. Was there any EPS dilution? Explain why or why not. (2 marks)

1. The underwriters suggested doing the deal on a "best efforts" basis. Explain what this means, and how this differs from a bought deal. (3 marks)