Northern Airlines is about to go public. It currently has aftertax earnings of $5,700,000 and 3,500,000 shares are owned by the present shareholders. The new public issue will represent 600,000 new shares. The new shares will be priced to the public at $25 per share, with a 6 percent spread on the offering price. There will also be $240,000 in out-of-pocket costs to the corporation.

a. Compute the net proceeds to Northern Airlines.

Net proceeds $

b. Compute the EPS immediately before the stock issue. (Round the final answer to 2 decimal places.)

EPS $

c. Compute the EPS immediately after the stock issue. (Round the final answer to 2 decimal places.)

EPS $

d. Determine what rate of return must be earned on the net proceeds to the corporation so that there will not be a dilution in EPS during the year of going public. (Round the intermediate calculations and the final answer to 2 decimal places.)

Rate of return %

e. Determine what rate of return must be earned on the proceeds to the corporation so that there will be a 10 percent increase in EPS during the year of going public. (Round the intermediate calculations and the final answer to 2 decimal places.)

Rate of return %