uestion 3 Normalize Earnings The following table presents th

uestion 3. Normalize Earnings The following table presents the most recent income statement of Company ELA The footnote of the 10-K filing mentions that the company recorded the following one-time items impairment charge of $10m pre-tax (generally included in \"other operating costs/expenses\"), restructuring charge of $15m pre-tax; gains from selling a warehouse of $2m pre-tax Normalize the earnings accordingly and calculate the adjusted diluted EPS Income Statement FY 2017 1000 615 385 230 Sales COGS Gross Profit S,G&A; Restructuring Charges 140 35 Operating Income (EBIT) Interest Expense EBT 22.05 82.95 Taxes (21 %) NI Weighted Average Diluted Shares Diluted Earnings Per Share 30 2.77

Solution

Net Income 82.95

Add: Restructuring charges (net of tax) 12.75

(15*85%)

Add: Impairment charges (net of tax) 8.5

(10*85%)

Less: Gain from selling a warehpuse (net of tax) 1.7

(2*85%)

Normalized earnings 102.5

Weighted average diluted shares 30

Adjusted diluted EPS 3.42

(Normalized earnings/wtd avg diluted shares)