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10 June, 13:13

On January 1, a company has 700,000 shares of issued and outstanding common stock. On March 1, the company repurchases 60,000 shares. On June 1, it effects a 2-for-1 stock split. On November 1, it issues 240,000 shares. The company has a net income for the year of $2,720,000.

Required:

What is the basic earnings per share of common stock for the year (rounded to the nearest cent) ?

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Answers (1)
  1. 10 June, 14:45
    0
    Basic EPS = 1.8

    Explanation:

    March 1 outstanding shares = 700,000 - 60,000 = 640,000

    June 1 outstanding shares = 640,000 * 2 = 1,280,000

    November 1 outstanding shares = 1,280,000 + 240,000 = 1,520,000

    Net income = $2,720,000.

    Basic earnings per shares (EPS) =

    income available to ordinary shareholders/Number of shares outstanding

    =$2,720,000/1,520,000 units = 1.789

    Basic EPS = 1.8
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