Effect of Financing on Earnings per Share Kelton Co., which produces and sells s

Question

Effect of Financing on Earnings per Share Kelton Co., which produces and sells skiing equipment, is financed as follows: Income tax is estimated at 40% of income. Determine the earnings per share on common stock, assuming that the income before bond interest and income tax is (a) $10,000,000, (b) $12,000,000, and (c) $14,000,000. Enter answers in dollars and cents, rounding to the nearest whole cent. Earnings per share on common stock $ Earnings per share on common stock $ Earnings per share on common stock $.

Explanation / Answer

Hi, If you like my answer rate me first...that way only I can earn points. Thanks The no. of shares to be used for calculation is only common stock (20 million shares) a) EPS = (EBIT - Interest)*(1- tax)/ No. of shares = $(10 million - 8% * 20 million)*(1-40%) / 20 million = $0.252 per share b) EPS = = $(12 million - 8% * 20 million)*(1-40%) / 20 million = $0.312 per share c) EPS = = $(14 million - 8% * 20 million)*(1-40%) / 20 million = $0.372 per share

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