You are given the following estimated per share data related to the S&P Industri

Question

You are given the following estimated per share data related to the S&P Industrials Index for the year 2010: Sales: $1,450.00 Depreciation: 58.00 Interest expense: 28.00 You are also informed that the estimated operating profit margin is 12 percent and the tax rate is 32 percent. a. Compute the estimated EPS for 2013. b. Assume that a member of the research committee for your firm feels that it is important to consider a range of operating profit margin (OPM) estimates. Therefore, you are asked to derive both optimistic and pessimistic EPS estimates using 11 and 13 percent for the OPM and and holding everything else constant.

Explanation / Answer

S & P Industrials Details Amt $ Per share details: Sales Revenue         1,450.00 Operating Income @12%             174.00 Less : Interest expense               28.00 Income before Tax             146.00 Less : Tax @32%               46.72 Net Income =               99.28 a EPS for 2013=               99.28 b Optimistic EPS Calculation: Per share details: Sales Revenue         1,450.00 Operating Income @13%             188.50 Less : Interest expense               28.00 Income before Tax             160.50 Less : Tax @32%               51.36 Net Income =             109.14 Optimistic EPS for 2013=             109.14 Pessimistic EPS Calculation: Per share details: Sales Revenue         1,450.00 Operating Income @11%             159.50 Less : Interest expense               28.00 Income before Tax             131.50 Less : Tax @32%               42.08 Net Income =               89.42 Optimistic EPS for 2013=               89.42

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