Candice MasesieM6 Written AssignmentCorporate FinanceProblem 13-11, p. 597EPS calculations:Southland Industries has $60,000 of 6% (annual interest) bonds outstanding, 1,500 shares of preferredstock paying an annual dividend of $5 per share, and 4,000 shares of common stock outstanding. Assuming that the firmhas a 40% tax rate, compute earnings per share (EPS) for the followinglevels of EBIT:a. $24,600b. $30,600c. $35,000To calculate the interest amount, use the following formula:Interest = Dollar amount of bonds outstanding x Annual interest rate.Interest = $60,000 x 6% =$3,600To calculate preferred dividends, I will use the following formula:Preferred dividends = Number of shares of preferred stock x Annual dividend per share.Preferred dividend = 1,500 x $5 =$7,500a. Compute earnings per share (EPS) for EBIT of $24,600.
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c. Compute EPS for EBIT$35,000