Answer:
new earnings per share is $1.53
Explanation:
Given data
excess cash = $300
Equity is worth = $5,000
other assets = $6,200
stock outstanding = 500 shares
net income = $720
to find out
new earnings per share
solution
we know that equity per value is Equity / stock outstanding
that is
equity per value = (5000 / 500) = 10
equity per value = $10
and
we can purchase equity with excess cash $300 that is
= excess cash / equity per value
purchase equity with excess cash = (300 / 10) = 30
purchase equity with excess cash = 30 shares
so
after repurchase we have balance share is = (500 - 30) = 470
balance share = 470 shares
so that
new earnings per share will be = net income / balance share
new earnings per share = (720 / 470) = 1.53
new earnings per share is $1.53
