Basic EPS Question

The following information pertains to Bender, Inc., for last year: Net income of \$25 million 1 million shares of \$10 par value preferred stock outstanding paying a 10% dividend 50 million shares of common stock outstanding at the beginning of the year Issued an additional 5 million shares of common stock on 7/1 What is Bender, Inc.’s basic earnings per share (EPS)? A) \$0.384. B) \$0.476. C) \$0.436. D) \$0.457 I am getting a differenet answer than Schweser, need to see someone else do this. Thanks

Just figured out my problem… I was using 100,000 as the preferreds dividend (1,000,000 * .10). Should actually be (10 * .10)(1,000,000) = \$1,000,000 right?

Yes, 1,000,000 is the correct amount for preferred dividends, and the answer should be D.

Bingo…answer should be D.

yes anwser will be D Basic EPS = net income - prefered Divident ---------------------------------------------- Wr .Avg share of common 25,000,000 - 1,000,000 ------------------------------ = 0.457 52500000 Wr .Avg share of common = (50 million * 12) + (5 Million * 6) --------------------------------------- = 52500000 12