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by hakyology » Wed Jul 02, 2008 10:16 am
a corporation with 5,000,000 shares of publicly listed stock reported total earnings of $7.20 pe 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?


Thank you.
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by asigheartau » Wed Jul 02, 2008 11:47 am
I think the answer is $4.85.

Earnings per share is the ratio btwn E. earnings and the number of shares.
Hence, for the first 9 months:

E/5,000,000=7.2 => E= 36,000,000

the last quarter:

E/10,000,000=1.25 => E=12,500,000

Earnings for the year totaled 48.5 million while the shares doubled to 10 million.

Representing this as a ratio gives us the total EPS as 48.5 mil/10mil=4.85

Please check for the answer and let me know. I am quite curious myself
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you're right.

by hakyology » Wed Jul 02, 2008 3:29 pm
thank you.
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by somail » Wed Jul 02, 2008 3:35 pm
I think asigheartau is on the right track, but I think it needs to be an average.

1. So (Q1+Q2+Q3+Q4)/4= Average earnings for the year

(36,000,000+12,500,000)/4=$12,125,000

2. Average Earning/10,000,000 = Ave earnings per share.

$12,125,000/10,000,000 = $1.21
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by hakyology » Wed Jul 02, 2008 3:42 pm
I double-checked the answer and it was precisely, $4.85.
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