Plan 2 Required 1035x 1037 AM Solution1 Earning Per Share EP

Plan 2 Required: 10.35x 1037 AM

Earning Per Share (EPS) = [(Income before interest & taxes - interest expense) * (100 - Tax %) - Preferred dividend] / Common shares in number

Plan 1 : EPS = [(14800000 - 0) * (1-0.40) - 0] / ($7400000 / $7.40) = 8880000 / 1000000 = $8.88 per common share

Plan 2 : EPS = [(14800000 - 0) * (1-0.40) -3700000*10%] / ($3700000 / $7.40) = 8880000 - 370000 / 500000 = $17.02 per common share

Plan 3 : EPS = [(14800000 - 3700000*10%) * (1-0.40) -1850000*10%] / ($1850000 / $7.40) = 8658000 - 185000 / 250000 = $33.89 per common share

Plan 1 : EPS = [(7030000 - 0) * (1-0.40) - 0] / ($7400000 / $7.40) = 4218000 / 1000000 = $4.22 per common share

Plan 2 : EPS = [(7030000 - 0) * (1-0.40) -3700000*10%] / ($3700000 / $7.40) = 4218000 - 370000 / 500000 = $7.70 per common share

Plan 3 : EPS = [(7030000 - 3700000*10%) * (1-0.40) -1850000*10%] / ($1850000 / $7.40) = 3996000 - 185000 / 250000 = $15.24 per common share

3. correct answer mentioned