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borishaifa [10]
3 years ago
11

Burns Company reported $1,161.405 million in net income in 2021. On January 1, 2021, the company had 409 million shares of commo

n stock outstanding. On March 1, 2021, 29.4 million new shares of common stock were sold for cash. On June 1, 2021, the company's common stock split 2 for 1. On July 1, 2021, 13.4 million shares were reacquired as treasury stock.Required: Compute Burns' basic earnings per share for the year ended December 31, 2021
Business
1 answer:
CaHeK987 [17]3 years ago
4 0

Answer:

Earnings Per Share = $1.35

Explanation:

To calculate the basic earnings per share, we first need to compute the Weighted Average No. of Shares Outstanding:

Jan.1: 409 * (12/12)    = 409 * 2                                    = 818 million

Mar.1: 29.4 * (10/12)   = 24.5 * 2                                   =  49 million

July 1: 13.4 * (6/12)                                                        =   <u>(6.7) million</u>

Weighted Average No. of Shares Outstanding:        =   860.3 million

Note: We multiplied by 2 in Jan.1 and Mar.1 transactions to account for common stock split 2 for 1.

Now calculate the Earnings Per Share:

Earnings Per Share =   <u>                        Net Income                                </u>

                                    Weighted Average No. of Shares Outstanding

Earnings Per Share =       <u>1,161.405</u>

                                            860.3

Earnings Per Share = $1.35

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Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division’s return o
baherus [9]

Answer:

NPV: $180,285.49

IRR: 21.336%

simple rate of return: 72.13%

Explanation:

6,100,000 investment

contribution margin 3,000,000

fixed expense:       <u>     900,000  </u>

EBITA                         2,100,000

We will calculate the NPV without the depreciation, as the depreciation is the distribution of the investment cost over the project life.

If we include the depreciation we will be counting the investment amount twice. Entirely at Time 0  and then subtracting on each cash inflow.

We will calculate the NPV at 20% as is the company's discount rate. Even if the current division returns are in 24% as the company accepts project which yields 20%.

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C 2,100,000

time 5 years

rate 20% = 20/100 = 0.2

2100000 \times \frac{1-(1+0.2)^{-5} }{0.2} = PV\\

PV $6,280,285.49

NPV = PV of cash inflow - investment

6,280,285.49 - 6,100,000 = 180,285.49

<u>the IRR:</u>

The internal rate of return is the rate at which the NPV of a priject is zero.

We calculate this using excel formula IRR

or a financial calculator

it could also be done with trial and error using the PV tables.

<u>I will explain you in Excel</u>

FIrst, you write the inflow and outflow per year:

-6,100,000

2,100,000

2,100,000

2,100,000

2,100,000

2,100,000

then we write on another cell:

=IRR(

then, select the cells

and press enter

21.336%

<u>the simple rate of return:</u>

(total return - investment) / investment

(2,100,000 x 5 - 6,100,000) / 6,100,000 =

4,400,000 / 6,100,000 = 0.721311475 = 72.13%

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Answer:

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Buydown, is the right answer.

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