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Billy Bobs has an operating profit of $300,000. Interest expense for the year was $35,000; preferred dividends paid were $28,900; and common dividends paid were $40,000. The tax was $75,000. The firm has 18,000 shares of common stock outstanding. 3. a. Calculate the earnings per share and the common dividends per share for Billy Bobs. add b. What was the increase in retained earnings for the year?

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Answer #1

3.Operating Profit = $300,000

Less: Interest = $35,000

EBT = $265,000

Less: Taxes = $75,000

Net Income before Preferred Dividend = $190,000

Less: Preferred Dividends = $28,900

Net Income = $161,100

Less: Common Dividends = $40,000

Addition to Retained Earnings = $121,100

a.Earnings per Share = Net Income/Number of Shares

= $161,100/18,000

= $8.95

Common Dividend per Share = Common Dividends/Number of Shares

= 40,000/18,000

= $2.22 per share

b. Increase in Retained Earnings = $121,100

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