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ps 400 test7 #14

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by dunkin77 » Fri Apr 06, 2007 1:10 pm
Hi,

The answer is C) but I don't seem to get the same answer.... Can you explain please?


A corporation with 5,000,000 shares of publicly listed stock reported total earnings of $7.20 per share for the first 9 months of operation. During the final quarter the number of publicly listed shares was increased to 10,000,000 shares, and fourth quarter earnings were reported as $1.25 per share. What are the average annual earnings per share based on the number of shares at the end of the year?
(A) $1.83
(B) $2.43
(C) $4.85
(D) $8.45
(E) $9.70
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by sudhirsk » Fri Apr 06, 2007 3:58 pm
The average earning/share = (Total revenue)/(total number of shares at the end of the year)

= (5,000,000 * 7.20 + 10,000,000 * 1.25)/10,000,000
= 4.85

Answer is C.
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by dunkin77 » Fri Apr 06, 2007 4:14 pm
Oh ok! I was trying to divide by 9 for the first 9 months and 4 for the last quarter but it dose not necesarry as long as total share is calcuated.

Thank you.
:)
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by Cybermusings » Fri Apr 06, 2007 11:30 pm
A corporation with 5,000,000 shares of publicly listed stock reported total earnings of $7.20 per share for the first 9 months of operation. During the final quarter the number of publicly listed shares was increased to 10,000,000 shares, and fourth quarter earnings were reported as $1.25 per share. What are the average annual earnings per share based on the number of shares at the end of the year?
(A) $1.83
(B) $2.43
(C) $4.85
(D) $8.45
(E) $9.70

You have to find the average annual earnings per share based on the number of shares at the end of the year

Total profit for the first 9 months = 5,000,000 * 7.2
Total profit for the next 3 months = 10,000,000 * 1.25

Thus total profit for the year = 36,000,000 + 12,500,000 = 48,500,000

Hence average for the year = 48,500,000/10,000,000 = $4.85
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by BTGmoderatorRO » Sun Oct 29, 2017 2:18 pm
The total earning= $$listed\ share\ \cdot\ \frac{value}{share}$$
But the total earning for the first 9 months
$$=5000000\cdot7.20=36000000$$
And the total earning for the fourth quarter = $$=10000000\cdot1.25=12500000$$
Total annual earning = $$36000000+12500000=48500000$$
the average annual per share = $$\frac{48500000}{10000000}=\text{4.85}$$
we have $4.85.
since there is total 10000000 listed share at the end of the year.
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by Scott@TargetTestPrep » Thu Nov 07, 2019 6:39 pm
dunkin77 wrote:Hi,

The answer is C) but I don't seem to get the same answer.... Can you explain please?


A corporation with 5,000,000 shares of publicly listed stock reported total earnings of $7.20 per share for the first 9 months of operation. During the final quarter the number of publicly listed shares was increased to 10,000,000 shares, and fourth quarter earnings were reported as $1.25 per share. What are the average annual earnings per share based on the number of shares at the end of the year?
(A) $1.83
(B) $2.43
(C) $4.85
(D) $8.45
(E) $9.70
Note that we are basing the average annual earnings per share on the number of shares at the end of the year.

Thus, when the number of shares was doubled, from 5,000,000 to 10,000,000, the per-share earnings from the first 9 months had to be halved; thus

(7.2/2) + 1.25 = 3.6 + 1.25 = 4.85.

Answer: E

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