Question

You have been given the following information for Moore’s HoneyBee Corp., calculate the earnings per share (EPS) and the interest expense for Moore’s HoneyBee Corp.

a. Net sales = $32,000,000;

b. Gross profits = $14,000,000;

c. SG&A (selling, general & administration) expenses = $2,500,000;

d. Addition to retained earnings = $4,500,000;

e. Dividends paid to preferred and common stockholders = $500,000;

f. Dividends paid to preferred and common stockholders = $1,500,000;

g. Depreciation expense = $2,800,000

h. # of common shares outstanding = 1,000,000

I. Corporate tax rate = 21%

Answer 1

Computation of Earning per share:

Gross profits 14,000,000

Less: SG&A (2,500,000)

Less: Depreciation Expense (2,800,000)

Profit before tax 8,700,000

Less: Tax @ 21% (1,827,000)

Profit After Tax 6,873,000

Number of share o/s 1,000,000

Earning per share 6.873

Computation of interest expense:

Addition to retained earning (4,500,000)

Dividend paid (2,000,000)

Profit After Tax (6,873,000)

After tax cost of interest 373,000

before tax interest cost= 373000/(100-21)%

=$ 472,152