Question

A firms Earnings Before Interest and tanxes(EBIT) is $239,667. The company's taxe rate is 35%. Its long term debt amounts $500,000 and carries a rate of 6%. It has 200,000 shares of common, par $5 outstanding amounting to It has common shares,$5 par 200,000
What is the company's eps? If its payout ratio is 40%, what is its dividend per share (DPS)?

Answer 1

Income Statement
Particulars	$
EBIT	239,667.00
Less: Interest	30,000.00
EBT	209,667.00
Less: Tax at 35% of EBT	73,383.45
Net Income	136,283.55
Number of common shares	200,000
EPS	$                         0.68
DPS (40% of EPS)	$                         0.27

EBT= EBIT - Interest
Tax = EBT * Tax rate
Net Income = EBT - Tax