Kramer Inc. had 86 million shares of common stock, 1 million shares of 5%, $100
ID: 2480966 • Letter: K
Question
Kramer Inc. had 86 million shares of common stock, 1 million shares of 5%, $100 par, cumulative preferred stock, and 1 million shares of 7%, $100 par, noncumulative preferred stock outstanding at the end of 2015 and 2016. No dividends were declared or paid on common stock in either year. In 2016, a $2.1 million dividend was paid on the 5% preferred stock and a $3.1 million dividend was paid on the 7% preferred stock. Net income for 2016 was $291 million. The company's tax rate is 30%.
Compute basic earnings per share for the year ended December 31, 2016. (Round your answer to 2 decimal places.)
Kramer Inc. had 86 million shares of common stock, 1 million shares of 5%, $100 par, cumulative preferred stock, and 1 million shares of 7%, $100 par, noncumulative preferred stock outstanding at the end of 2015 and 2016. No dividends were declared or paid on common stock in either year. In 2016, a $2.1 million dividend was paid on the 5% preferred stock and a $3.1 million dividend was paid on the 7% preferred stock. Net income for 2016 was $291 million. The company's tax rate is 30%.
Explanation / Answer
Net Income is incoem after interest and tax but before any dividend.
Earnings available for common stockholders =
EAT $291 million
Less: Preferred stock dividend
(2.1 million + 3.1 miilion) $5.2 million
Arrears of Dividend (1000000 * 5% * 100) $5 million
Earnings available for common stockholders $280.80
EPS = 280800000 / 86000000 = $3.27 per share
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