The income statement for Travers & Co. is shown below. The firm currently has 25
ID: 1172267 • Letter: T
Question
The income statement for Travers & Co. is shown below. The firm currently has 25.0 million shares of common stock outstanding. However, an analyst has looked at the firm's outstanding warrants and options to determine the likelihood of them being exercised. The analyst has determined that the firm's adjusted number of common shares after the expected dilution is 28.5 million. INCOME STATEMENT (Milions of dollars) $1,400 1,200 50 $ 150 Total revenues -Operating costs excluding depreciation - Depreciation and amortization expense Operating income (EBIT) - Interest expense Taxable income - Taxes Net income - Preferred dividends Net income available to common shareholders $125 48 Common dividends Addition to retained earnings 61 $16 Answer the following questions about Travers & Co.'s income statement. What is the firm's DPS for 2005? O $2.44 O $2.25 O $2.83 O $3.05 O $2.03 What is the basic EPS? O $3.20 O $3.08 O $4.09 O $3.65 O $3.45 What is the diluted EPS? O $4.25 O $2.83 O $2.70 O $4.26 O $3.45 What is the firm's operating margin? ? 15.53% ? 10.71% ? 13.79% 5.50% ? 7.72% What is the firm's net profit margin? o 5.50% ? 13.79% O 11.74% ? 15.53% ? 14.98%Explanation / Answer
a) Firm's DPS = $2.44
Calculation:-
DPS= Total dividend distributed/ Total number of shares
= $61 million/ 25 million
=$2.44
b) Basic EPS= $3.08
Calculation:-
Basic EPS= Total earning for common share holder/ Total common shares
= $77 million/ 25 million
=$3.08
c)Diluted EPS= $2.70
Calculation:-
Diluted EPS= Total earning for common share holder/ Total common shares after taking effect of dilution
= $77million/ 28.5 million
=$2.70
d)Firm operating margin= 10.71%
Calculation:-
Operating margin= Operating income(EBIT)/Sales i.e. Total revenue
=150 million/1400 million
=10.71%
e) Firm's net profit margin = 5.5%
Calculation:-
Net profit margin = Net income/ Total revenue
= 77 million/ 1400 million
=5.5%
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