ACME, Inc. reported the following income statement for 2009: Sales $2,500,000 Va
ID: 2632173 • Letter: A
Question
ACME, Inc. reported the following income statement for 2009:
Sales
$2,500,000
Variable Costs
900,000
Fixed Operating Costs
700,000
EBIT
900,000
Interest Expense
200,000
EBT
700,000
Taxes (30%)
210,000
Net Income
$490,000
Earnings Per Share
$4.90
If ACME's sales next year increase by 20%, what will ACME's earnings per share be?
Select one:
a. $6.45
b. $7.14
c. $7.58
d. $5.76
Sales
$2,500,000
Variable Costs
900,000
Fixed Operating Costs
700,000
EBIT
900,000
Interest Expense
200,000
EBT
700,000
Taxes (30%)
210,000
Net Income
$490,000
Earnings Per Share
$4.90
Explanation / Answer
New Sales = 1.2*2500000
=$3000000
No. of shares outstanding of ACME = 490000/4.90
100000 shares
EPS = 714000/100000
=$7.14 is the EPS
Sales $ 3,000,000 Variable Costs 1,080,000 Fixed Operating Costs 700,000 EBIT 1,220,000 Interest Expense 200,000 EBT 1,020,000 Taxes (30%) 306,000 Net Income $ 714,000Related Questions
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