QUESTION 2 ONLY

Firehouse Chocolatiers has two major product lines:

• A chocolate truffle set called Speckled Jim that retails at $20 per unit, and costs $5 to manufacture.
• A specialty marzipan loaf called Scarlet Pimpernel that retails at $35 per unit, and costs $10 to manufacture.

In 2015 Firehouse Chocolatiers sold 60,000 units of Speckled Jim and 25,000 units of Scarlet Pimpernel. Firehouse Chocolatiers incurred Selling and Administrative expenses of $100,000 and Amortization expenses of $30,000. Additionally, Firehouse Chocolatiers has a $100,000 loan outstanding at 12% and had to make a lawsuit payment of $50,000. Its tax rate is 30%. There are 100,000 common shares outstanding.

The dividend payout ratio for December 31, 2015 will be 35%.

Required:

1. Prepare an income statement for the year ended Dec 31, 2015 (include EPS).
2. Given Firehouse Chocolatiers has a P/E ratio of 10. Calculate the Market Price per share.
3. Calculate the total dollar amount of the dividends that will be paid in 2015
4. Firehouse Chocolatiers decides to use $500,000 from previous retained earnings to buy back its own shares. How many common shares will remain after the repurchase?
5. What will be the new Earnings per Share after the repurchase?