averages topic

Question

A corporation with 5,000,000 shares of publicly listed stock reported total earnings of $7.20 share for the first 9 months of operation .during the final quarter the no of publicly listed shares was increased to 10,000,000 shares and fourth quarter earnings was reported as $1.25 per share .what are the avg annual earnings per share based on the no of shares at the end of the year?

 

(a)$1.83

(b)$2.43

(c)$4.85

(d)$8.45

(e)$9.70

Answer 1

First, figure out the total earnings for the year:

 

5,000,000($7.20) + 10,000,000($1,25) = $36,000,000 + $12,500,000 = $48,500,000

 

Earnings per share based on shares outstanding at the end of the year:

 

$48,500,000 / 10,000,000 = $4.85