An analyst with Smith, Kleen & Beetchnutty Securities is trying to determine the EPS for a stock market series. Which of the following steps will not be involved in his EPS estimation?
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A. B. C. D. E. F.Explanation
All of these answers are required steps in the estimation of the EPS figure for a stock market series.
When an analyst is trying to determine the EPS for a stock market series, the following steps represent the preferred method:
Step 1: Estimate sales-per-share for the series
Step 2: Estimate the operating profit margin for the series
Step 3: Estimate the depreciation-per-share for the series for the next year
Step 4: Estimate the interest-expense-per-share for the next year
Step 5: Estimate the corporate tax rate for the next year
These steps will lead to an EPS figure, which can be multiplied by the appropriate earnings multiplier (i.e. the price-to-earnings ratio) to determine the ending price for the stock market series.