Question

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

Answer 1

- 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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