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2.             Far East Fast Foods had earnings after taxes of $1,320,000 in the year 20XX with...

2.            
Far East Fast Foods had earnings after taxes of $1,320,000 in the year 20XX with 304,000 shares outstanding. On January 1, 20XY, the firm issued 10,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 30 percent.

a. Compute EPS of the year 20XX. (Round the final answer to 2 decimal places.)

EPS           $

  

b. Compute EPS of the year 20XY. (Round the final answer to 2 decimal places.)

  

EPS

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Answer #1

Answer :- Computation of EPS for the year 20XX and 20XY :-

Earning Per Share = Earning after taxes / Shares outstanding

For 20XX :-

EPS = $1,320,000 / 304,000

EPS = $4.34

For 20XY :-

Earning after taxes = $1,320,000 + ( $1,320,000 * 30%)

Earning after taxes = $1,320,000 + $396,000

Earning after taxes = $1,716,000

Shares outstanding = 304,000 + 10,000 = 314,000

EPS = $1,716,000 / 314,000

EPS = $5.46

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