Homework Answers
Earnings per share is the net income per share available to common shareholders of a Company.
Earnings per share = (Net income – Preferred dividends)/Weighted average number of common shares outstanding
In calculating EPS, ordinary net income is considered and any one-off gains or losses are excluded. So, loss from discontinued operations is excluded from calculating net income for EPS calculation.
Net income (post-tax) = $24,000,000
Tax rate = 25%
One-time loss on account of discontinued operations (before-tax) = $17,000,000
Post-tax loss on account of discontinued operations = $17,000,000 – (25%*$17,000,000)
= $12,750,000
Net income for EPS purpose = Post-tax net income + post-tax loss from discontinued operations
= $24,000,000 + $12,750,000
= $36,750,000
Further, preferred dividends = 10% * $4,700,000
= $470,000
So, EPS = ($36,750,000 - $470,000)/10,000,000
= $3.628 per share or $3.63 per share
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