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Griffin’s Goat Farm, Inc., has sales of $689,000, costs of $305,000, depreciation expense of $55,000, interest...

Griffin’s Goat Farm, Inc., has sales of $689,000, costs of $305,000, depreciation expense of $55,000, interest expense of $28,000, and a tax rate of 22 percent. The firm paid out $117,000 in cash dividends, and has 40,000 shares of common stock outstanding.
a. What is the earnings per share, or EPS, figure?
b. What is the dividends per share figure?
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Answer #1

a. The earnings per share is computed as shown below:

Net profit is computed as follows:

= (Sales - costs - depreciation - interest) - tax @ 22%

= ($ 689,000 - $ 305,000 - $ 55,000 - $ 28,000) - 22%

= $ 234,780

So, the EPS will be as follows:

= $ 234,780 / Number of common stock outstanding

= $ 234,780 / 40,000

= $ 5.87 Approximately

b. The dividend per share is computed as follows:

= Cash dividend / Number of common stock outstanding

= $ 117,000 / 40,000

= $ 2.925 Approximately

Feel free to ask in case of any query relating to this question

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