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by daretodream » Fri Feb 19, 2010 3:25 am
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 ajith » Fri Feb 19, 2010 3:58 am
daretodream wrote: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
For first 9 Months total earnings = 7.2*5,000,000 = 3.6*10,000,000
Last quarter earnings = 1.25*10,000,000

Total earnings = 4.85*10,000,000

EPS = 4.85*10,000,000/10,000,000 = 4.85
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by harsh.champ » Fri Feb 19, 2010 4:21 am
daretodream wrote: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
Lets do it in steps.
Step 1 For the 1st 9 months:-Total earnings = Total shares x Earning per share
= 5,000,000 x $7.20
= $36,000,000
Step 2 For the Final quarter(i.e.last 3 months) = New Total shares x New Earning per share
= 10,000,000 x $1.25
= $12,500,000

Adding the earnings in both the steps,we get $36,000,000 + $12,500,000 = $48,500,000

Based on the number of shares at the end of the year,the average annual earnings = $48,500,000/10,000,000
[spoiler]=$4.85 which is C.[/spoiler]
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