Westonci.ca is your trusted source for finding answers to a wide range of questions, backed by a knowledgeable community. Explore in-depth answers to your questions from a knowledgeable community of experts across different fields. Get immediate and reliable solutions to your questions from a community of experienced professionals on our platform.

If a company reports operating profit of $70 million, earns net income of $50 million in year 8, has 20 million shares of common stock outstanding, pays a dividend of $1. 50 per share, and has annual interest costs of $15 million--all in year 8, then

Sagot :

The company's EPS for Year 8 would be $2.50 and its retained earnings for Year 8 would be $20 million

How do we calculate EPS and retained earnings?

Note: The options for the questions are as follows:

A. the company's total earnings for Year 8 would be $10 million (net income of $50 million less interest costs of $10 million less dividend payments of $30 million = $10 million).

B. the company's EPS for Year 8 would be $2.50 and its retained earnings for Year 8 would be $20 million (net income of $50 million less dividend payments of $30 million).

C. the company's credit rating would be no less than an A because operating profit is seven times higher than annual interest costs.

D. the company's EPS for Year 8 would be $5.50 and its retained earnings for Year 8 would be $10million (net income of $50 million less interest costs of $10 million less dividend payments of $30million).

E. the company's EPS for Year 8 would be $1.50 (operating profit of $70 million less interest costs of$10 million, less dividend payments of $30 million= $30 million divided by 20 million shares).

The question can now be answered as follows:

From the question, we can calculate the following:

EPS = Net income / Number of shares of common stock outstanding = $50 million / 20 million = $2.50

Dividend payments = Number of shares of common stock outstanding * Dividend per share = 20 million * $1. 50 = $30 million

Retained earnings = Net income - Dividend payments = $50 million - $30 million = $20million

Therefore, the correct option is B. the company's EPS for Year 8 would be $2.50 and its retained earnings for Year 8 would be $20 million (net income of $50 million less dividend payments of $30 million).

Learn more about EPS here: https://brainly.com/question/19671991.

#SPJ1

We hope this information was helpful. Feel free to return anytime for more answers to your questions and concerns. We appreciate your visit. Our platform is always here to offer accurate and reliable answers. Return anytime. Get the answers you need at Westonci.ca. Stay informed by returning for our latest expert advice.