On December 31, 2017, Dow Steel Corporation had 680,000 shares of common stock a
ID: 2510143 • Letter: O
Question
On December 31, 2017, Dow Steel Corporation had 680,000 shares of common stock and 38,000 shares of 8%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 4% common stock dividend on May 15 and paid cash dividends of $480,000 and $77,000 to common and preferred shareholders, respectively, on December 15, 2018.
On February 28, 2018, Dow sold 54,000 common shares. In keeping with its long-term share repurchase plan, 4,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2018, was $2,500,000. The income tax rate is 40%.
As part of an incentive compensation plan, Dow granted incentive stock options to division managers at December 31 of the current and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows:
The market price of the common stock averaged $24 per share during 2018.
Required:
Compute Dow's earnings per share for the year ended December 31, 2018. (Enter your answers in thousands.)
Explanation / Answer
All Amount's in "000"
Net Income = $2500
Preferred Shares Dividends = $77
Weighted average Share of Common Stock Outstanding :-
EPS = (Net Income - Dividend Paid) / Weighted Average shares
= ($2500 - $77) / 752 shares
= $2423 / 752
= $3.22 per share
1/1 to 31/12 (680 shares*(12/12)*1.04) 707.2 shares 28/2 to 31/12 (54 shares*(10/12)*1.04) 46.8 shares 1/7 to 31/12 (4 shares * (6/12)) (2) shares Weighted Average shares 752 sharesRelated Questions
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