Domanico Co., which produces and sells biking equipment, is financed as follows:
| Bonds payable, 6% (issued at face amount) | $5,000,000 |
| Preferred $2 stock, $100 par | 5,000,000 |
| Common stock, $25 par | 5,000,000 |
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock, assuming that the income before bond interest and income tax is (a) $600,000, (b) $800,000, and (c) $1,200,000.
Frey Co. is considering the following alternative financing plans:
| Plan 1 | Plan 2 | |
|---|---|---|
| Issue 5% bonds (at face value) | $6,000,000 | $2,000,000 |
| Issue preferred $1 stock, $20 par | – | 6,000,000 |
| Issue common stock, $25 par | 6,000,000 | 4,000,000 |
Income tax is estimated at 40% of income.
Determine the earnings per share of common stock, assuming that income before bond interest and income tax is $800,000.
Whispering Corporation earned $422,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of $15 per share during the period. Also outstanding were 14,700 warrants that could be exercised to purchase one share of common stock for $10 for each warrant exercised.
(a) Are the warrants dilutive?
(b) Compute basic earnings per share.
(c) Compute diluted earnings per share.
A firm had the following accounts and financial data for 2005: Sales revenue $3,060 Accounts receivable $500 Interest expense $126 Total operating expenses $600 Accounts payable $240 Cost of goods sold $1,800 Preferred stock dividends $18 Tax rate 40% Number of common shares outstanding 1,000 The firm’s earnings per share, rounded to the nearest cent, for 2005 was _____.
a. $0.5335
b. $0.5125
c. $0.3204
d. $0.3024
