Question

The balance sheet and income statement of a firm are shown below. Note that the firm has no amortization charges, it does not lease any assets, and none of its debt must be retired during the next 5 years (numbers are in millions). BALANCE SHEET Cash $ 140.0 Accounts payable $ 800.0 Accts. receivable 880.0 Notes payable 600.0 Inventories 1,320.0 Accruals 400.0 Total current assets $2,340.0 Total current liabilities $1,800.0 Long-term bonds 1,000.0 Total debt $2,800.0 Common stock (50,000 shares) 200.0 Retained earnings 1,000.0 Net plant & equip. 1,660.0 Total common equity $1,200.0 Total assets $4,000.0 Total liabilities & equity $4,000.0 INCOME STATEMENT Net sales $ 6,000.0 Operating costs 5,599.8 Depreciation 100.2 EBIT $ 300.0 Less: Interest 96.0 EBT $ 204.0 Less: Taxes 51.0 Net income $ 153.0 OTHER DATA Shares outstanding (millions) 70.00 Common dividends $42.8 Interest rate on N/P and long-term bonds 6.0% Federal plus state income tax rate 25.0% Year-end stock price $30.60 What is the firm's EPS (earnings per share)?

Answer 1

Earnings per share (EPS) = Net income divided by number of outstanding shares

= $153/70 = $2.19

Step-by-step explanation:

a) Data and Calculations:

BALANCE SHEET

Cash $ 140.0

Accts. receivable 880.0

Inventories 1,320.0

Total current assets $2,340.0

Net plant & equip. 1,660.0

Total assets $4,000.0

Accounts payable $ 800.0

Notes payable 600.0

Accruals 400.0

Total current

liabilities $1,800.0

Long-term bonds 1,000.0

Total debt $2,800.0

Common stock

(50,000 shares) 200.0

Retained earnings 1,000.0

Total common

equity $1,200.0

Total liabilities &

equity $4,000.0

INCOME STATEMENT

Net sales $ 6,000.0

Operating costs 5,599.8

Depreciation 100.2

EBIT $ 300.0

Less: Interest 96.0

EBT $ 204.0

Less: Taxes 51.0

Net income $ 153.0

OTHER DATA

Shares outstanding (millions) 70.00

Common dividends $42.8

Interest rate on N/P and long-term bonds 6.0%

Federal plus state income tax rate 25.0%

Year-end stock price $30.60