Question
Please help me with this question 1. Johnson Inc. wishes to expand its facilities. The company currently has 6 million shares outstanding and no debt.
Please help me with this question
1. Johnson Inc. wishes to expand its facilities. The company currently has 6 million shares outstanding and no debt. The stock sells for $50 per share, but the book value per share is $20. Net income for Johnson is currently $12 million. The new facility will cost $20 million, and it will increase net income by $800,000. Johnson raises stock at the current price to finance the facility. Assume a constant priceearnings ratio. Does book value dilution occur?
Group of answer choices
a. book value dilution occurs.
b. book value dilution does not occur.
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