Question

Bulldog, Inc. had net income of \$8,500,000 in 2017.  On January 1, 2017, the company had 6,000,000...

Bulldog, Inc. had net income of \$8,500,000 in 2017.  On January 1, 2017, the company had 6,000,000 common shares outstanding.  The company issued 150,000 common shares on April 1, 2017, 150,000 common shares on June 1, 2017, and repurchased 500,000 common shares on October 1, 2017. The company paid \$450,000 in preferred stock dividends and \$175,000 in common stock dividends during the year. What was the company's basic earnings per share (EPS) in 2017?

 a. \$1.466 b. \$1.417 c. \$1.380 d. \$1.325 e. \$1.296

- Earnings Per Share(EPS) = (Net Income - Preferred Dividend)/Weighted average no of shares outstanding)

- Calculating Weighted average no of shares outstanding:-

 Time Interval No of Months Shares Outstanidng calculation Weighted Average Jan, 01 - Apr 01 3 6000,000 6000,000*3/12 1500,000 Apr 01 - June 01 2 6150,000 = (6000,000 + 150,000) 6150,000*2/12 1025,000 June 01 - Oct 01 4 6300,000 = (6150,000 + 150,000) 6300,000*4/12 2100,000 Oct01 - Dec 31 3 5800,000 = (6300,000 - 500,000) 5800,000*3/12 1450,000 6075,000

Earnings Per Share(EPS) = (\$8,500,000 - \$450,000)/6075,000 shares

EPS = \$1.325 per share

Option D

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