On Jan 1, a firm had 700 stocks outstanding. On May 1, it issued 300 more shares. On October 1, it repurchased 100 shares. If the firm's net income was 12,000 and it paid a preferred dividend of 1,400, its reported EPS is ________.
Click on the arrows to vote for the correct answer
A. B. C. D.D
For a simple capital structure, EPS = (Net Income - Preferred stock dividends)/weighted # of common shares To calculate the weighted # of shares, note that 600 shares remained outstanding for 12 months, 100 shares for 9 months and 300 shares for 8 months. Therefore, weighted shares = 12/12*600 + 9/12*100 +
8/12*300 = 875. EPS = (12,000 - 1,400)/875 = 12.11.