compute earnings per share if earnings before interest and taxes are $10,000, $15,000 and $50,000

CaptainForest

This is by far not enough information to compute EPS.

First, what are the total outstanding shares? Next, what is the net income?

Any preferred shares? Did they get dividends?

bowler2

Sorry...no preferred shares, no dividends

Debt @ 10% = $50,000
Common Stock $10 par = 100,000
Shares = 10,000
Tax rate 30%
Total $150,00

sachintholia

Case 1. When EBIT is $10,000
EBIT $10,000
- Int ($5,000)
EBT $5,000
- Tax $1,500
PAT $3,500

EPS = PAT/No of Shares $3,500/10,000 = $0.35

Case 2. When EBIT is $15,000
EBIT $15,000
- Int ($5,000)
EBT $10,000
- Tax $3,000
PAT $7,000

EPS = PAT/No of Shares $7,000/10,000 = $0.70
Case 3. When EBIT is $50,000
EBIT $50,000
- Int ($5,000)
EBT $45,000
- Tax $13,500
PAT $31,500

EPS = PAT/No of Shares $31,500/10,000 = $3.15

bowler2

this is not my best subject so thank you, thank you, sachintholia. i even understand what you did...

asaz_007

Ezzell Pakistan is a Public Limited Company listed on the three stocks exchanges of the country i.e. Karachi, Lahore and Islamabad. The company deals in manufacturing of Electric appliances. The research and development department of the corporation has developed a solar panel capable of generating 200 % more electricity than any solar panel currently available in the market. As a result of this achievement, the financial analysts in stock market expect that the company will experience a 15% annual growth rate for the next five years. By the end of 5 years, other firms will have developed comparable technologies; and the corporation’s growth rate will slow down to 5% per annum for an indefinite period. Stockholders require a return of 12% on Ezzell Pakistan‘s common stocks. The most recent annual dividend (Do), which was paid yesterday, was Rs.1.75 per share.


Required:
a) Calculate expected dividends of the company for the next five years
b) Calculate the value of the stock today i.e. Po.
c) Calculate the expected dividend yields for 1st, 5th and 6th years.
(e.g., for 1st year Dividend yield = D1/ Po)

sachintholia

Price of the share is the present value of all the expected dividend



Step 1 compute the dividents of five years





step 2 compute present value of these five year dividend\




step 3 compute the present value of gowring perpetuty , i.e.from sixth year to infinity

which will come at end of year five






step 4 , compute the present value of step 3 which is at year 5 right now



step 5 just add step 2 and 3 to have the total of step 2 and step 4














Expected Divident at the end of year 1
D1
D0 ( 1+ g)
1.75(1+.15)
Expected Divident at the end of year 2
D2
D0 ( 1+ g)^2
1.75(1+.15)^2
Expected Divident at the end of year 3
D3
D0 ( 1+ g)^3
1.75(1+.15)^3
Expected Divident at the end of year 4
D4
D0 ( 1+ g)^4
1.75(1+.15)^4
Expected Divident at the end of year 5
D5
D0 ( 1+ g)^5
1.75(1+.15)^5







Total of dividend present value for fist five years










PV of div from 6th year to infinity with grwoth rate of 5% =
D6/0.12 - 0.05

3.52(1.05)/0.12-0.05





3.7/0.07














Prcie of the share i.e P0

9.48 + [52.8 *0.567]












9.48 + 29.94

Ans

sachintholia

solution above is not clear and hence the proper format its in word file zipped to solution.zip which is attached , please see to it and if u find any problem , feel free to ask again

Attached Files

solution.zip (5.7 KB, 3 views)