Typ Electro Wizard Company produces a popular video game called Destructo which

Question

Typ

ElectroWizardCompanyproducesa popularvideogamecalledDestructowhich sells for $65. Last year ElectroWizard sold 100,000 Destructogames, each of which costs $10 to produce.ElectroWizardincurred selling and administrative expenses of $200,000 and depreciation expense of $100,000. In addition, ElectroWizard has a $1000,000 loan outstanding at 8%. Their tax rate is 40%. There are 400,000 common shares outstanding. Show and explain all work.

Prepare an income statement for ElectroWizardin good form and include earnings per share (EPS)

e your question here

Explanation / Answer

Income Statement:

Sales (100000*65) = 6500000

Less: COGS(100000*10) = (1000000)

Operating Income= 5500000

Less Selling expense = (200000)

less: Depreciation = (100000)

EBIT = 5200000

Less: Interest(1000000 *8/100) = (80000)

EBT = 5120000

less Taxes(40%) = ( 2048000)

EAT = 3072000

divide by NO of shares to get EPS

So, EPS = 3072000/400000 = 7.68$

Thanks

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