Question: American Health Systems has 6,500,000 shares of stock outstanding and will report earnings of $17 million in the current year. The company is considering the issuance of 1,400,000 additional shares, which can only be issued at $28 per share.
a. Assume that American Health Systems can earn 9 percent on the proceeds. Calculate earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.)
b. Should the new issue be undertaken based on earnings per share?