Suppose the firm (has sales of $586,000, costs of $247,000, depreciation expense of $43,000, interest expense of $32,000, and a tax rate of 35 percent) had 85,000 shares of common stock outstanding. What is the earnings per share, or EPS, figure? What is the dividends per share figure?
To calculate the earnings per share (EPS) figure, we need to subtract expenses from sales to find the net income first. Then, we divide the net income by the number of shares outstanding.
1. Calculate the net income:
Net Income = Sales - Costs - Depreciation Expense - Interest Expense - Taxes
Net Income = $586,000 - $247,000 - $43,000 - $32,000 - ($586,000 * 0.35)
Net Income = $586,000 - $247,000 - $43,000 - $32,000 - $205,100
Net Income = $58,900
2. Calculate the earnings per share (EPS):
EPS = Net Income / Number of Shares Outstanding
EPS = $58,900 / 85,000
EPS ≈ $0.6935
Thus, the earnings per share (EPS) figure is approximately $0.6935.
To find the dividends per share figure, we need additional information about the dividend payout ratio or the total amount of dividends paid. Without this information, we cannot calculate the dividends per share figure.