Answered: How much are the total earnings will be…

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 55E: Rebert Inc. showed the following balances for last year: Reberts net income for last year was...

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Question

the published annual report showed the following:

-Operating profit for the year was EGP 5,000,000.

-Interest Expense was EGP 800,000.

-The group is subject to 20% taxes.

-Number of common shares outstanding was 300,000.

-The group has 100,000 Preferred stocks of EGP 15 par value.

If you know that the group pays 10% dividends for each preferred stock, answer the following questions

How much are the total earnings will be available for common stockholders?
Calculate the Earnings per share (EPS) and the Dividends per share (DPS) if the board of directors decided to retain 70% of the year's earnings for further investment.

2---is considering replacing a production line with a new, more productive one. You are given the information that follows.

The existing production line currently generates $150,000 profit per year and could be sold today for $50,000.
The new proposed production line would generate profits of $150,000 per year
The new proposed production line requires an initial investment $80,000.
The company is seeking your advice regarding whether to replace the production line or keep the existing one.

Required:

Based on the Marginal analysis concept, what would you recommend?
State the reasons why focusing on profit only should not be the optimal goal for companies.

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