Question

ou have been given the following information for Moore’s HoneyBee Corp., calculate the earnings per share (EPS) and the interest expense for Moore’s HoneyBee Corp. a. Net sales = $32,000,000; b. Gross profits = $14,000,000; c. SG&A (selling, general & administration) expenses = $2,500,000; d. Addition to retained earnings = $4,500,000; e. Dividends paid to preferred stockholders = $500,000; f. Dividends paid to common stockholders = $1,500,000; g. Depreciation expense = $2,800,000 h. # of common shares outstanding = 1,000,000 I. Corporate tax rate = 21%

Answer 1

a)	Earnings Per Share
	= Net Income / No of Common Shares Outstanding
	Where,
	Net Income
	= Addition to Retained Earnings + Dividends paid to preferred and Common Stockholders
	= $4,500,000 + $500,000 + $1,500,000
	= $6,500,000
	No of Common Shares Outstanding = 1,000,000
	So,
	Earnings Per Share
	= Net Income / No of Common Shares Outstanding
	= $6,500,000 / 1,000,000
	= $6.50
b)	Net Income = (Gross Profits - SG&A Expenses - Depreciation - Interest)*(1-Tax Rate)
	$6,500,000 = ($14,000,000 - $2,500,000 - $2,800,000 - Interest)*(1-21%)
	$6,500,000 = ($8,700,000 - Interest)*0.79
	$6,500,000 = $6,873,000 - Interest*0.79
	Interest*0.79 = $6,873,000 - $6,500,000
	Interest*0.79 = $373,000
	Interest = $373,000/0.79
	Interest = $472,151.90