Problem Solving

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

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.

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.

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

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.