A firm expects to have earnings before amortization and taxes of $150,000 in each of the next three years. There are no interest payments and taxes are at a rate of 40%. It is considering the purchase of an asset costing $120,000 requiring $15,000 in installation costs and having a recovery period of three years.
a. Calculate the amortization expense for year three using straight line amortization.
b. If preferred dividends paid are $20,000, common stock dividends paid are $20,000, and the number of shares of common stock outstanding is 10,000, what are the reported EPS in year three?

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The Answer of A firm expects to have earnings before amortization and taxes of $150,000 in each of the next three years. There are no interest payments and taxes are at a rate of 40%. It is considering the purchase of an asset costing $120,000 requiring $15,000 in installation costs and having a recovery period of three years.
a. Calculate the amortization expense for year three using straight line amortization.
b. If preferred dividends paid are $20,000, common stock dividends paid are $20,000, and the number of shares of common stock outstanding is 10,000, what are the reported EPS in year three?

A Firm Expects to Have Earnings Before Amortization and Taxes