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Domanico Co
Domanico Co., which produces and sells biking equipment, is financed as follows:
if Bonds payable, 10% (issued at face amount)$850,000Preferred $2 stock, $20 par850,000Common stock, $25 par850,000
Income tax is estimated at 40% of income.
Determine the earnings per share on common stock, assuming that the income before bond interest and income tax is (a) $348,500, (b) $433,500, and (c) $518,500.
Enter answers in dollars and cents, rounding to two decimal places.
a. Earnings per share on common stock $fill in the blank 1
b. Earnings per share on common stock $fill in the blank 2
c. Earnings per share on common stock $
Expert Solution
| Computation of Earnings per Share: | |||
| Particulars | a | b | c |
| Income before bond interest and income tax | $348,500 | $433,500 | $518,500.00 |
| Less: Bond Interest ($850000*10%) | 85000 | 85000 | 85000 |
| Income before tax | $263,500 | $348,500 | $433,500 |
| Less: Income Tax @40% | $105,400 | $139,400 | $173,400 |
| Income after tax | $158,100 | $209,100 | $260,100 |
| Less: Preferred Dividends (850000/20*2) | 85000 | 85000 | 85000 |
| Income Available for Shareholders (a) | $73,100 | $124,100 | $175,100 |
| Number of Common shares Outstanding (850,000/$25) (b) | 34000 | 34000 | 34000 |
| Earnings per Share (a/b) | $2.15 | $3.65 | $5.15 |
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