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Billy’s Exterminators, Inc., has sales of $592,000, costs of $284,000, depreciation expense of $36,000, interest expense of $28,000, a tax rate of 35 percent, and paid out $40,000 in cash dividends. The firm has 80,000 shares of common stock outstanding. What are the earnings per share?

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Answer:

EPS = $1.9825

Explanation:

EPS (earnings per share) = Net Income / shares of common stock outstanding

Income before taxes = $592,000 - $284,000 - $36,000 - $28,000 = $244,000

Tax = $244,000 x 35% = $85,400

Net Income = $244,000 - $85,400 = $158,600

EPS = $158,600 / 80,000 = $1.9825

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