Calculate EPS for Frantic Fast Foods

Frantic Fast Foods

Calculate EPS for Frantic Fast Foods for $2 Only (Instant Download)

Frantic Fast Foods had earnings after taxes of $1,200,000 in 20X1 with 322,000 shares outstanding. On January 1, 20X2, the firm issued 30,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 24 percent.

a. Compute earnings per share for the year 20X1. (Round your answer to 2 decimal places.)
Earnings per share _

b. Compute earnings per share for the year 20X2. (Round your answer to 2 decimal places.)

Earnings per share __

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Newlin Electronics EBIT EPS Caluculation

Newlin Electronics EBIT EPS Caluculation for $4 Only

Newlin Electronics

Newlin Electronics is considering additional financing of $10,000. It currently has $50,000 of 12%( annual interest) bonds and 10,000 shares of common stock outstanding. The firm can obtain the financing through a 12% (annual interest) bond issue or through the sale of 1,000 shares of common stock. The firm has a 40% tax rate.

a. Calculate two EBIT-EPS coordinates for each plan by selecting any two EBIT values and finding their associated EPS values.
b. Plot the two financing plans on a set of EBIT–EPS axes.
c. On the basis of your graph in part b, at what level of EBIT does the bond plan become superior to the stock plan?

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Finance Questions

Finance Questions Answers in $9 only

Question 1

Lump sum issuance of stock.

Landon Corporation has issued 2,000 shares of common stock and 400 shares of preferred stock for a lump sum of $72,000 cash.

Instructions

(a)          Give the entry for the issuance assuming the par value of the common was $5 and the market value $30, and the par value of the preferred was $40 and the market value $50. (Each valuation is on a per share basis and there are ready markets for each stock.)

(b)          Give the entry for the issuance assuming the same facts as (a) above except the preferred stock has no ready market and the common stock has a market value of $25 per share.

Question 2

Treasury stock.

For numerous reasons, a corporation may reacquire shares of its own capital stock. When a company purchases treasury stock, it usually accounts for the stock using the cost method.

Instructions

Explain how a company would account for each of the following:

1. Purchase of shares at a price less than par value.

2. Subsequent resale of treasury shares at a price less than purchase price, but more than par value.

3. Subsequent resale of treasury shares at a price greater than both purchase price and par value.

4. Effect on net income.

Question 3

Dividends on preferred stock.

The stockholders’ equity section of Knott Corporation shows the following on December 31, 2007:

Preferred stock—6%, $100 par, 4,000 shares outstanding$   400,000
Common stock—$10 par, 60,000 shares outstanding$  600,000
Paid-in capital in excess of par$  200,000
Retained earnings$  114,000
Total stockholders’ equity$ 1,314,000

instructions

Assuming that all of the company’s retained earnings are to be paid out in dividends on 12/31/07 and that preferred dividends were last paid on 12/31/05, show how much the preferred and common stockholders should receive if the preferred stock is cumulative and fully participating.

Question 4

(EPS with Convertible Bonds and Preferred Stock)

On January 1, 2007, Crocker Company issued 10-year, $2,400,000 face value, 10% bonds, at par. Each $1,000 bond is convertible into 16 shares of Crocker common stock. Crocker’s net income in 2007 was $300,000, and its tax rate was 40%. The company had 100,000 shares of common stock outstanding throughout 2007. None of the bonds were converted in 2007.

Instructions

(Round answers to 2 decimal places.)

a.)    Compute diluted earnings per share for 2007.

b.)    compute diluted earnings per share for 2007 using the same facts as those assumed for part (a), except that $1,200,000 of 10% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 7 shares of Crocker common stock.

Question 5

Basic and diluted EPS.

The following information was taken from the books and records of Simonic, Inc.:

Instructions

Compute basic and diluted earnings per share.

Answer available.

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Dooley Co. EPS and Diluted EPS

Dooley Co. EPS and Diluted EPS in $2.50 only

Dooley Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 10% convertible bonds outstanding during 2001. The preferred stock is convertible into 40,000 shares of common stock. During 2001, Dooley paid dividends of $1.20 per share on the common stock and $3.00 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2001 was $600,000 and the income tax rate 30%.

Basic earnings per share for 2001 is (rounded to nearest penny)

a. $2.50

b. $2.70

c. $2.73

d. $3.00

Diluted earnings per share for 2001 is (rounded to nearest penny)

a. $2.14

b. $2.25

c. $2.35

d. $2.46

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Question of Quisco Systems

Wikimedia's 2006 expenses.

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Quisco Systems has 6.5 billion shares outstanding and a share price of $18. Quisco is considering developing a new networking product in house at a cost of $500 million. Alternatively, Quisco can acquire a firm that already has the technology for $900 million worth (at the current price) of Quisco stock. Suppose that absent the expense of the new technology, Quisco will have EPS of $0.80.

a. Suppose Quisco develops the product in house. What impact would the development cost have on Quisco’s EPS? Assume all costs are incurred this year and are treated as an R&D expense, Quisco’s tax rate is 35%, and the number of shares outstanding is unchanged.

b. Suppose Quisco does not develop the product in house but instead acquires the technology. What effect would the acquisition have on Quisco’s EPS this year? (Note that acquisition expenses do not appear directly on the income statement. Assume the firm was acquired at the start of the year and has no revenues or expenses of its own, so that the only effect on EPS is due to the change in the number of shares outstanding.)

c. Which method of acquiring the technology has a smaller impact on earnings? Is this method cheaper? Explain.

ANSWERS AVAILABLE

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