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ella [17]
4 years ago
5

At December 31, 2017, Sager Co. had 1,200,000 shares of common stock outstanding. In addition, Sager had 450,000 shares of prefe

rred stock which were convertible into 750,000 shares of common stock. During 2018, Sager paid $1,200,000 cash dividends on the common stock and $800,000 cash dividends on the preferred stock. Net income for 2018 was $6,800,000 and the income tax rate was 40%. The diluted earnings per share for 2018 is (rounded to the nearest penny
Business
1 answer:
AnnZ [28]4 years ago
8 0

Answer: $3.49

Explanation:

Diluted earnings per share = \frac{Net Income}{Outstanding Common Stock + Convertible shares}

Diluted Earnings per share = \frac{6,800,000}{1,200,000 + 750,000}

Diluted Earnings per share = 3.4871

Diluted Earnings per share = $3.49

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3 0
4 years ago
1. Why do firms choose to make large increases in their dividends or start a stock repurchase program?2. Why do firms choose to
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Answer with Explanation:

Requirement 1:

The companies whose products are in growth phase or the company is cash cow which has a well diversified products does not have to invest in adding a new product line because their earnings are already stable enough or that they don't have to invest much because sufficient profits are left after extracting for investments. Increase in dividends has two meanings that either the management is confident enough that they think that the company will be able to earn more in the future and they will achieve better position in future which is a good news in the stock exchange and for investors as well and investor invest more in the company's ordinary stock.

Company start Stock repurchase program which is to buyback its previously issued ordinary shares which is because the management thinks that the stock is undervalued and thus they repurchase their ordinary shares so that the stock will go up in near future and this will benefit the company and the existing shareholders as well. This also helps in increasing earnings per share, return on equity, etc because the equity is reduced by share repurchase program.

Stock repurchase program is also run by the organization because they don't find any attractive opportunities. This means that the company does not have any large investment opportunities which means growth in revenue and profit can not be expected in the future years. Thus when the company starts repurchasing of stock the investor starts selling their stocks.

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If the company thinks that they can increase the worth of shareholders beyond their shareholder's expectation then they don't pay dividend and invest in projects to increase the sales growth, profits and market share significantly in the coming future.

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