Question

Your next-door neighbor thinks that she has discovered the next food craze: a blend of Chinese and Mexican cuisine she is calling Wildhorse. She already has one location that is busy all day. She currently has gross sales of $17.55 million. Her expenses, which include ingredients, rent, and personnel, run $15.20 million. Your neighbor is considering bringing in outside investors. She would like to issue 5 million shares of stock and sell the stock for $32.55 each in an IPO. If she does this, how much would someone who purchases one share earn? In other words, what is the earnings per share for the company?

Answer 1

Answer:

$33.02

Explanation:

EPS (Earnings Per Share) would be simply,

Total Earnings divided by the number of shares outstanding

First, we need to find our total earnings. We will get this by summing up Sales and Net Income from selling shares. Then we will minus the expenses.

So,

Sales = 17.55 mill

Net Income from Shares = 5 mill shares AT $32.55 each = 5 mill * 32.55 = $162,750,000

Expenses = 15.20 mill

Thus,

Total Earnings = 17,550,000 + 162,750,000 - 15,200,000 = 165,100,000

Total Shares = 5 million

So, EPS would be:

EPS = 165,100,000/5,000,000 = $33.02