Question

Company ZYX has sales of $664000, costs of $255000, depreciation expense of $45000, interest expense of $31000, and a tax rate of 30.00%. The firm paid out $108000 in cash dividends, and has 30,000 shares of common stock outstanding. What is the earnings per share (EPS) and dividends per share (DPS)?

A.

$7.77 and $3.60

B.

$9.01 and $4.15

C.

$8.65 and $3.60

D.

$7.77 and $4.80

Answer 1

Answer: A
$7.77 and $3.60

Solution:

Income Statement
Particulars	$
Sales	$        664,000
Less: Costs	$        255,000
EBITDA	$        409,000
Less: Depreciation	$          45,000
EBIT	$        364,000
Less: Interest expense	$          31,000
EBT	$        333,000
Less: Tax at 30%	$          99,900
Earnings Available for shareholders	$        233,100
Number of shares	30,000
EPS	$               7.77

Here,

EPS = Earnings Available for shareholder / Number of shares

Amount of dividend paid	$        108,000
Number of shares	30,000
DPS	$               3.60

Here,
DPS = Amount of dividend paid / Number of shares.

Note:
EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization
EBIT = Earnings Before Interest and Taxes
EBT = Earnings Before Tax
EPS = Earning Per Share
DPS = Dividend Per Share