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Question : 9% preference shares of 10 each Rs. 5,00,000, Equity shares of 10 each Rs.1,20,000, Profit after tax Rs.4,20,000, Equity dividend paid 20%, Market price of equity shares Rs.25 each. What will be the earnings per share?

Option 1: 3.20

Option 2: 3.30

Option 3: 3.125

Option 4: 3.32


Team Careers360 18th Jan, 2024
Answer (1)
Team Careers360 23rd Jan, 2024

Correct Answer: 3.125


Solution :

Profit after tax 4,20,000
(-) Preference dividend (5,00,000 × 9%)

(45,000)

Profit available for equity shareholders 3,75,000

To calculate earnings per share, take a company's net income and subtract from that preferred dividends. Then divide that amount by the average number of outstanding common shares.
EPS = 3,75,000/1,20,000 = 3.125
Hence option 3 is the correct answer.

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