At December 31, 2015 and 2016, Funk & Noble Corporation had outstanding 1,000 mi

Question

At December 31, 2015 and 2016, Funk & Noble Corporation had outstanding 1,000 million shares of common stock and 13 million shares of 4%, $100 par value cumulative preferred stock. No dividends were declared on either the preferred or common stock in 2015 or 2016. Net income for 2016 was $1,652 million. The income tax rate is 40%.

Calculate earnings per share for the year ended December 31, 2016. (Round your answer to 2 decimal places.)

Calculate earnings per share for the year ended December 31, 2016. (Round your answer to 2 decimal places.)

Explanation / Answer

Earnings available for common stockholder = Net Income – Preferred Dividend

                                                                                      = 1652 million – (13 million x 100 x 4%)

                                                                                       = 1652 million – 52 million

                                                                                       = 1600 million

Earnings per share = Earnings available for common stockholder / no. of shares outstanding

                                      = 1600 million /1000 million

                                      = 1.60

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