of k, 1 million shares of 5%, $100 par, cumulative preferred stock, and 1 millio

Question

of k, 1 million shares of 5%, $100 par, cumulative preferred stock, and 1 million shares Kramer Inc had 93 million shares of common stoc 7%, $100 par, noncumulative preferred stock outstanding at the end of 2017 and 2018 No dividends were declared or paid on common stock in either year. In 2018, a $2.8 million dividend was paid on the 5% preferred stock on the 7% preferred stock. Net income for 2018 was $298 million. The company's tax rate is 30%. and a $3 8 million dvidend was paid Required: Compute basic earnings per share for the year ended December 31, 2018 (Round your answer to 2 decimal places.)

Explanation / Answer

EPS = ( net income - preference dividend ) / No. of outstanding shares

( 298 million - [ 100 * 5 % * 1 million shares ] - 3.8 million ) / 93 million

$ 3.11 per share

Full $ 5 million will be deducted as dividend for cumulative preference shareholders irrespective of declaration.

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