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If a company achieved a net profit of 500 thousand $ and its shares capital value...

If a company achieved a net profit of 500 thousand $ and its shares capital value of one million $ consisting of 400 thousand share of common stocks with a par value of 2 $ and 20000 share of preferred stocks with a par value of 10 $ per share and dividends of 25% Find earning per share EPS :

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Answer #1

Given

Net profit = $500,000

Share capital = $1,000,000

Number of common shares = 400,000

Par value of share = $2

Preferred stock par value = $10 per share

Dividend rate on preferred share = 25%

Number of preferred shares = 20,000

EPS = [ net income – Preferred Dividends] / Number of common shares

Preferred dividends per share = 10 * 25 % = $2.5 per share

Preferred dividends = $2.5 * 20,000 = $50,000

EPS = [ $500,000 – $50,000] / 400,000 = 1.125

Earnings Per Share EPS = 1.125

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