If a company’s profit before tax is Rs.500000/- and tax rate is 28%, preference share dividend is Rs.8000/-

Banking & FinanceFinance ManagementGrowth & Empowerment

DateParticularsPurchaseSellRemaining
01.04.XXXXTotal shares

20000
01.10.XXXXPreference share is converted to equity share4500
24500
01.01.XXXXShares buyback
200022500

Considering above data and table. Calculate EPS

Solution

The solution is given below −

             EPS = (P-Pd) / WACS

  • Calculating Profits minus preference shares (P-Pd).

P – Pd = profit before tax – profit after tax rate – preference share dividends

P – Pd = 500000 – {500000 (28%)} - 8000

P - Pd = 500000 – 140000 – 8000

P – Pd = 352000/-

  • Weighted Average number of shares (WACS).

WACS = (20000*(6/12)) + (24500*(3/12)) + (22500*(3/12))

WACS = 10000 + 6125 + 5625

WACS = 21750/-

         EPS = (P-Pd) / WACS
         EPS = 352000 / 21750
            EPS = 16.18
raja
Published on 25-Sep-2020 17:59:09
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