Question

Frantic Fast Foods had earnings after taxes of $1,070,000 in 20X1 with 311,000 shares outstanding. On January 1, 20X2, the firm issued 31,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 24 percent.
a. Compute earnings per share for the year 20X1. (Round your answer to 2 decimal places.)




b. Compute earnings per share for the year 20X2. (Round your answer to 2 decimal places.)

Answer 1

Answer:

X1 EPS =  $ 3.44 per share

X2 EPS = $ 3.88 per share

Explanation:

$EPS = \frac{income}{shares}$

X1: Earning per share

$1,070,000 / 311,000 shares outstanding = $3.44 per share

X2: net income calcualtions

1,070,000 x ( 1  +  24%) = 1,326,8‬00

X2 shares outstanding:

beginning 311,000 + issued 31,000 = 342,000

EPS: 1,326,800 / 342,000 =  3,8795 = 3.88