Question

Question (a) needed.

Griffins Goat Farm, Inc., has sales of $671,000, costs of $333,000, depreciation expense of $77,000, interest expense of $48,500, a tax rate of 24 percent, and paid out $44,500 in cash dividends. The firm has 28,000 shares of common stock outstanding. a. What are the earnings per share figure? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What are the dividends per share figure? (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is not complete. Earnings per share Dividends per share $ 1.59

Question (b) needed.

Answer 1

Question 1 | Part (a): Calculate Earning per Share

The Earnings per Share (EPS) can be calculated usign the given formula:

EPS = ( Profit after Tax - Preferred stock dividend) / Number of Shares of common stock

Preferred stock dividend = 0 ....(not mentioned hence, not considered)

Number of shares of common stock = 28000 ...(given)

Profit After Tax = Calculated Below

Particulars	Amount ($)	Calculations
Sales	671000	Given
Less: Costs	-333000	Given
Less: Depreciation	-77000	Given
Less: Interest Expense	-48500	Given
Profit Before Tax	212500	= 671000 - 333000 - 77000 - 48500
Less: Tax	51000	= 24% * 212500
Profit After Tax	263500	= 212500 - 51000

Where, Profit Before Tax = Sales - Costs - Depreciation - Interest Expense

Tax = Tax Rate * Profit Before Tax

Profit After Tax = Profit Before Tax - Tax Rate = $ 263,500

Using this in the EPS formula given above,

EPS = (263500 - 0 ) / 28000

EPS = $ 9.41 ...answer

Question 2 | Part (b): Calculation of Operating Cash Flows

The Operating cash flows (OCF) can be calculated as:

OCF = Profit after tax + Depreciation - Increase in working capital

Depreciation = $ 149500

Increase in working capital = 0 ... (Assumed - Not given)

Profit after tax = calculated below

Particulars	Amount ($)	Calculations
Sales	769000	Given
Less: Costs of goods sold	-464000	Given
Less: Admin & selling expenses	-104000	Given
Less: Depreciation	-149500	Given
Less: Interest Expense	-74200	Given
Profit Before Tax	-22700	= 769000 - 464000 - 104000 - 149500 - 74200
Less: Tax	0	= Maximum of ((24% * -22700) or 0)
Profit After Tax	-22700	= -22700 - 0

Where, Profit Before Tax = Sales - Costs of goods - admin and selling expenses - Depreciation - Interest Expense

Tax = Maximum of ( Tax Rate * Profit Before Tax , 0 ) .....(since no carry forward of losses allowed)

Profit After Tax = Profit Before Tax - Tax Rate = $ -22,700

Hence, using operating cash flows can be calculated using the formula given above:

OCF = -22700 + 149500 - 0 = $ 126,800

Hence, the Operating cash flows are $ 126,800   ...answer