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Question 8 If a company earns net income of $48 million in Year 8, has 20 million shares of common stock outstanding, pays a dividend
Question 8 If a company earns net income of $48 million in Year 8, has 20 million shares of common stock outstanding, pays a dividend of $1.00 per share, and has annual interest costs of $10 million, then the company's EPS for Year 8 would be $2.40 and its retained earnings for Year 8 would be $28 million (net income of $48 million less dividend payments of $20 million); the $28 million addition to retained earnings would cause shareholders' equity investment to increase by $28 million in Year 8. the company's retained earnings for the year would be $28 million; the $28 million in retained earnings would be shown on the company's balance sheet as a reduction in equity investment by stockholders in Year 9. the company's EPS for Year 8 would be $4.80 and its retained earnings for Year 8 would be $36 million (net income of $48 million less dividend payments of $28 million); the $20 million addition to retained earnings would cause shareholders' equity investment to increase by $28 million in Year 8. O the company's EPS for Year 8 would be $2.40 and its retained earnings for Year 8 would be $38 million (net income of $48 million less interest payments of $10 million); the $38 million addition to retained earnings would cause shareholders' equity investment to increase by $38 million in Year 8. o the company's retained earnings for the year would be $18 million (net income of $48 million less dividend payments of $20 million less interest costs of $10 million) and its earnings per share would be $2.00
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