Midland Corporation has a net income of $$14$ million and $5$ million shares outstanding. Its common stock is currently selling for $$47$ per share. Midland plans to sell common stock to set up a major new production facility with a net cost of $$23,688,000.$ The production facility will not produce a profit for one year, and then it is expected to earn a $12$ percent return on the investment. Stanley Morgan and Company, an investment banking firm, plans to sell the issue to the public for $$42$ per share with a spread of $6$ percent.

a$.$ How many shares of stock must be sold to net $$23,688,000?($Note: No out$-$of$-$pocket costs must be considered in this problem.$)$

Note: Do not round intermediate calculations and round your answer to the nearest whole number.

b$.$ What are the earnings per share $($EPS$)$ and the price$-$earnings ratio before the issue $($based on a stock price of $$47)?$ What will be the price per share immediately after the sale of stock if the P$/$E stays constant?

Note: Do not round intermediate calculations and round your answers to $2$ decimal places.

c$.$ Compute the EPS and the price $($if the P$/$E stays constant$)$ after the new production facility begins to produce a profit.

Note: Do not round intermediate calculations and round your answers to $2$ decimal places.

d$-1.$ Are the shareholders better off because of the sale of stock and the resultant investment?

multiple choice

Yes

No

d$-2.$ What other financing strategy could the company have tried to increase earnings per share?

Note: You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer.

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Combination of debt and stockunanswered

Stock splitunanswered

Debt financingunanswered

Repurchased stockunanswered