Question

A company reported net income of $9,660,000 for the year. There were 4.1 million shares of common stock outstanding at the beginning of the year and 4.3 million shares outstanding at the end of the year. No dividends were declared during the year. What is the company’s earnings per share (EPS) for the year?

Answer 1

Answer:

$2.30

Explanation:

Total shares of common stock = 4,100,000 + 4,300,000 = 8,400,000

Weight of the beginning of the year common stock = 4,100,000 ÷ 8,400,000 = 0.49, or 49%

Weight of the ending of the year common stock = 4,300,000 ÷ 8,400,000 = 0.51, or 51%

Weighted average share outstanding = (4,100,000 × 49%) + (4,300,000 × 51%) = 4,202,000

EPS = Net income ÷ Weighted average share outstanding = $9,660,000 ÷ 4,202,000 = $2.30