Question

Green Thumb Nursery has 55,000 shares outstanding at a market price of $63.61 per share. The earnings per share are $3.61. The firm has total assets of $366,000 and total liabilities of $209,000. Today, the firm announced a share repurchase for $121,000 of its stock. What is the earnings per share after the repurchase?

Multiple Choice

• $3.87

• $3.74

• $3.51

• $3.61

• $3.80

Answer 1

The EPS is computed as shown below:

= Net income / Number of shares outstanding

Net income is computed as follows:

= Earnings per share x Number of shares outstanding

= $ 3.61 x 55,000

= $ 198,550

Number of shares outstanding after the repurchase is computed as follows:

= Current shares - Share repurchase amount / Market price per share

= 55,000 - $ 121,000 / $ 63.61

= 53,097.78337 shares

So, the EPS will be as follows:

= $ 198,550 / 53,097.78337 shares

= $ 3.74 Approximately

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