Question

Adam Company's net income for the year is $100 million. Weighed-average shares are 50 million shares. In addition to common shares, the company also has $50 million par value, 8% cumulative preferred stock outstanding. The company's basic EPS will be $2.08:____________

Answer 1

$1.92 per share

Step-by-step explanation:

The computation of the earning per share is shown below:

Earning per share = (Net income - dividend) ÷ (Weighted Number of shares)

where,

Net income is $100 million

Preference dividend is

= $50 million × 8%

= $4 million

And, the weighted number of shares is 50 million

So, the earning per share is

= ($100 million - $4 million) ÷ (50 million shares)

= $1.92 per share

So we applied the above formula so that the earning per share could come