Question

Fairview Corporation recorded the following in 2018: After-tax net income was $20 million in 2018. The actual share count at the beginning of the year was 10.0 million. Fairview repurchased 2 million shares at $12/share in the middle of 2018. Fairview issued preferred dividends of $3 million and common dividends of $2 million. Fairview issued 4 million stock options in 2018 that begin to vest in 2019. Calculate 2018 basic earnings per share (EPS).

Answer 1

Answer: $1.89

Explanation: As, we know that :-

`Basic\:EPS=(net\:income\:for\:common\:shareholders)/(no.\:of\:shares)`

where,

net income for common shareholders = net income - preferred dividend

= $20 - $3 = $17

`No.\:of\:shares=10* (12)/(12)-2* (6)/(12)`

= 9 shares

so putting the values into equation we get :-

`Basic\:EPS=(\$17)/(9shares)`

= $1.89