# EPS question

Given: 2001 net sales \$10,000,000 2001 net profit margin 5.0% 2002 expected sales growth -15% 2002 expected profit margin 5.4% 2002 expected common stock shares outstanding 120,000 The company’s 2002 expected earnings per share is closest to: a. \$3.72 b. \$3.83 c. \$4.17 This one stumped me, so I’d appreciate knowing the logic. Thanks!

Is it not B? ((This Year’s Sales) * Margin) / Shares outstanding ((10,000,000*.85) * .054 ) / 120,000 = 3.825

Answer is B. Thanks for the quick response. I was trying to include the 2001 net profit margin.

Ah, that happens.

B is right’’ detail details details

Is it not B? ((This Year’s Sales) * Margin) / Shares outstanding ((10,000,000*.85) * .054 ) / 120,000 = 3.825 please expain the .85 that is multiplied by 10m up there…question says expected sales growth is 15 % so we should increase 10m by 15% and den calculate 5.4% of that as net income …please correct me??

Sales growth is -15% not 15% meaning sales has declined by 15% and hence (10,000,000*0.85)

B