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Anall equity firm with an EBIT of $3,500, an interest rate of 6%, and 380 sharesoutstanding has an The Earnings-Per-Share (EPS) of $______.

Question

Anall equity firm with an EBIT of 3,500,aninterestrateof63,500, an interest rate of 6%, and 380 sharesoutstanding has an The Earnings-Per-Share (EPS) of ______.

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Solution

To calculate the Earnings-Per-Share (EPS), we first need to calculate the Earnings After Tax (EAT).

Step 1: Calculate Earnings After Interest but Before Tax (EBIT) The EBIT is already given as $3,500.

Step 2: Calculate Earnings Before Tax (EBT) Since it's an all equity firm, there is no interest expense. So, EBT is also $3,500.

Step 3: Calculate Earnings After Tax (EAT) The problem does not provide a tax rate, so we'll assume the EAT is the same as the EBT, which is $3,500.

Step 4: Calculate Earnings Per Share (EPS) EPS is calculated by dividing the EAT by the number of shares outstanding.

So, EPS = EAT / Number of shares outstanding = 3,500/380=3,500 / 380 = 9.21 (rounded to the nearest cent)

So, the Earnings-Per-Share (EPS) of the firm is $9.21.

This problem has been solved

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