1_On_EPS - Here is an example that points out the...

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On EPS Financial managers are frequently misled when they focus on the accounting definition of profit, for earnings per share the objective of the firm is not to maximize earnings per share. The correct objective is to maximize shareholders wealth, which is the price per share that in turn is equivalent to the discount cash flows of the firm.
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Unformatted text preview: Here is an example that points out the difference between maximizing earnings per share and maximizing discounted cash flow. LIFO FIFO Revenue 100 100 Cost of goods sold -90 -25 Operating income 10 75 Taxes at 40% -4-30 Net income 6 45 Earning per share (100shs) .06 0.45 Cash flow per shares 0.96 0.70...
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This note was uploaded on 06/11/2011 for the course ACCT 3607 taught by Professor Mike during the Spring '11 term at Assumption College.

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