Question

Sidewinder, Inc., has sales of $702,000, costs of $345,000, depreciation expense of $90,000, interest expense of $55,000, and a tax rate of 22 percent. The firm paid out $85,000 in cash dividends and has 38,400 shares of common stock outstanding. a. What is the earnings per share, or EPS, figure? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the dividends per share figure? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Answer 1

a. To calculate earnings per share (EPS), we need to first find the net income of the company.

Net income = Sales - Costs - Depreciation - Interest - Taxes

Net income = $702,000 - $345,000 - $90,000 - $55,000 - 0.22($702,000 - $345,000 - $90,000 - $55,000)

Net income = $702,000 - $345,000 - $90,000 - $55,000 - $133,980

Net income = $78,020

Now, we can calculate EPS as:

EPS = Net income / Number of shares

EPS = $78,020 / 38,400

EPS = $2.03 (rounded to two decimal places)

Therefore, the earnings per share (EPS) figure is $2.03.

b. To calculate dividends per share, we divide the total cash dividends by the number of shares:

Dividends per share = Total cash dividends / Number of shares

Dividends per share = $85,000 / 38,400

Dividends per share = $2.21 (rounded to two decimal places)

Therefore, the dividends per share figure is $2.21.