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30 April, 10:25

Farah Snack Co has earnings after taxes of $128, 750. Interest expense for the year was $20,000: preferred dividends paid were $18, 750: and common paid were $30,000. Taxes were $15,000. The firm has 100,000 shares of common stock outstanding Earnings per share on the common stock was

A. $0.90

B. $1.10

C. $0.75

D. $0.80

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  1. 30 April, 13:29
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    A. $0.90

    Explanation:

    Earning per share = (Net Income - dividends on preferred stocks) / average outstanding common shares

    Particulars Amount

    Earning After Tax 128750

    Taxes 15000

    Earning before Tax & Interest Expense 143750

    Interest Expense (20000)

    Earning after Interest, but before Tax 123750

    Taxes (15000)

    Earning after Taxes 108750

    Preferred Dividends (18750)

    Earning available for common stock holders 90000

    common stock outstanding 100000

    Earning per share 0.9

    Therefore, The outstanding Earnings per share on the common stock was $0.90
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