Question

Griffins Goat Farm, Inc., has sales of $667,000, costs of $329,000, depreciation expense of $73,000, interest expense of $46,500, a tax rate of 25 percent, and paid out $47,000 in cash dividends. The firm has 27,200 shares of common stock outstanding.

a. What are the earnings per share figure? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. What are the dividends per share figure? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
a. Earnings per share
b. Dividends per share

Answer 1

Answer and Explanation:

The computation of the earnings and dividend per share is shown below;

But before that the net income should be determined

Sales 667000

Less: Costs 329000

Income before depreciation, interest and taxes 338000

Less: Depreciation expenses 73000

Operating income 265000

Less: Interest expenses 46500

Income before tax 218500

Less: Tax at 25% 54625

Net income 163875

a Earning per share = Net income ÷ Outstanding Common stock

= $163,875 ÷ 27200

= $6.02 per share

b Dividend per share = Dividend paid ÷ Outstanding Common stock

= $47000 ÷ 27200

= $1.73 per share