Final answer:
The basic earnings per share in the given example is calculated by dividing the present value of total profits, $51.3 million, by the number of shares, which is 200. This results in an EPS of approximately $256,500 per share. Expected profits and present value calculations are involved in determining this figure.
Step-by-step explanation:
To calculate the basic earnings per share (EPS), we must divide the present value of total profits (PDV) by the number of shares outstanding. In the given scenario, where the PDV is $51.3 million and the number of shares is 200, the calculation would follow as such: 51.3 million divided by 200, yielding a result of 0.2565 million, or $256,500 per share. The basic EPS reflects the amount of profit that is attributable to each share of common stock, and in this case, it would be reported as $256,500 per share.
When dealing with future amounts, a distinct PDV calculation must be conducted for amounts received at different times. This involves discounting future earnings back to their present value using an appropriate interest rate. In this example, a 15% interest rate is used for the present value calculations. These calculations help to determine what a future amount is worth today, taking into account the time value of money.
The real-life computation of expected profits is often a complex estimation rather than a definitive figure, involving assumptions about future performance and interest rates. However, for the purpose of this example, a precise PDV is provided to calculate the EPS.