Category: Business and Money > Accounting
Asked by: shemrob-ga
List Price: $25.00
20 Jul 2005 09:59 PDT
Expires: 19 Aug 2005 09:59 PDT
Question ID: 545831
mr gold is in the widget businesd. He currently sells 1 million widgets a year at $5 each. His variable cost to produce the widgets is $3 per unit, and he has $1,500,000 in fixed cost. His sales-to-assets ratio is five times, and 40 percent of his assets are financed with 8 percnet debt, with the balance financed by common stock at $10 per share. The tax rate is 40 percent. Compute earnings per share I HAVE TO HAVE THE ANSWER BEFORE 4:PM TODAY!!!!!!!
Answered By: omnivorous-ga on 20 Jul 2005 10:30 PDT
Shemrob ? Sales = $5,000,000 Assets (at 5:1) = $1,000,000 Bonds (40%) = $400,000 Stock = $600,000 = 60,000 shares Contribution margin (at $2 per widget) = $2,000,000 Fixed cost = $1,500,000 EARNINGS BEFORE INTEREST + TAXES (EBIT) = $500,000 Bond payments (8%) = $32,000 Taxes = ($500,000 - $32,000) * 0.40 = $187,200 NET INCOME = $280,800 EARNINGS PER SHARE = $280,800/60,000 shares = $4.68 If any part of this step-by-step calculation is unclear, please request a clarification and I'll explain it in more detail. Best regards, Omnivorous-GA
rated this answer:
Thank you please see next question--i need it before 5pm today
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