Question

Kevin’s Bacon Company Inc. has earnings of $5 million with 2,500,000 shares outstanding before a public distribution. Four hundred thousand shares will be included in the sale, of which 200,000 are new corporate shares, and 200,000 are shares currently owned by Ann Fry, the founder and CEO. The 200,000 shares that Ann is selling are referred to as a secondary offering and all proceeds will go to her.The net price from the offering will be $19.50 and the corporate proceeds are expected to produce $1.1 million in corporate earnings.a. What were the corporation’s earnings per share before the offering? (Do not round intermediate calculations and round your answer to 2 decimal places.)

Answer 1

Answer:

Before the offering EPS = $2

Explanation:

before the offering therefore, before the Ann Fry new shares transactions are completed.

earnings: 5,000,000

shares outstanding: 2,500,000

EPS= (income - preferrred dividends) / shares outstanding

before the offering there are no preferred shares thus, no preferred divideds

                  5,000,000 / 2,500,000 = $2 per share