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If a company earns net income of $35 million in Year 8, has 10 million shares of stock, pays a dividend of $1.50 per share,
If a company earns net income of $35 million in Year 8, has 10 million shares of stock, pays a dividend of $1.50 per share, and has annual interest costs of $15 million, then the company's retained earnings for Year 8 would be $5 million (net income of $35 million less dividend payments of $15 million less $15 million in interest payments) and its Year 8 EPS would be $0.50. the company's retained earnings for Year 8 would be $35 million. the company would have Year 8 EPS of $3.50 and Year 9 retained earnings of $10 million. the company would have EPS of $3.50 for Year 8 and also its retained earnings for Year 8 would be $20 million (net income of $35 million less dividend payments of $15 million). the company's earnings per share would equal $2.00 (net income of $35 million less dividend payments of $15 million = $20 million divided by 10 million shares)
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