Arnold's Construction is an all-equity firm with 120,000 shares of stock outstanding.The book value per share is $14 and the market value per share is $54.The current net income is $385,000.The firm is considering a new project that will cost $2.1 million and increase net income by $120,000.The current earnings per share are ____ and they will be ____ if the project is accepted.

Question

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Current EPS = $385,000/120,000 = $3.21New shares outstanding = 120,000 + $2,100,000/$54 = 158,889New EPS = ($385,000 + 120,000)/158,889 = $3.18

Arnold's Construction Is an All-Equity Firm with 120,000 Shares of Stock