Question

Billy’s Exterminators, Inc., has sales of $749,000, costs of $306,000, depreciation expense of $58,000, interest expense of $39,000, a tax rate of 35 percent, and paid out $73,000 in cash dividends. The firm has 100,000 shares of common stock outstanding.

What is the earnings per share?
What is the dividends per share?

Answer 1

Earnings per share = $2.25

Dividend per share = $0.73

Step-by-step explanation:

given data

sales = $749,000

costs = $306,000

depreciation expense = $58,000

interest expense = $39,000

tax rate = 35 percent

paid out dividends = $73,000

no of share = 100,000

solution

first we get here Net income that is

Net income = Profit before tax (PBT) - Tax .........1

EBIT = sales - costs - depreciation expense

EBIT = $749,000 - $306,000 - $58,000

EBIT = $385,000

and

Profit before tax = EBIT - interest = $385,000 - $39,000 = $346,000

tax is = 35 % of Profit before tax

tax = 35% of $346,000 = $121,100

so

Net income = $346,000 - $121,100

Net income = 224,900

and

Earnings per share will be here as

Earnings per share = Net income ÷ Number of shares ..................2

Earnings per share =
`(224900)/(100000)`

Earnings per share = $2.25

and

Dividend per share will be here as

Dividend per share = Cash dividends ÷ Number of shares .....................3

Dividend per share =
`(73000)/(100000)`

Dividend per share = $0.73