Butterfield's is an all-equity firm with 132,000 shares of stock outstanding.The book value per share is $14,and the market value per share is $31.The current net income is $301,000.The firm is considering a new project that will cost $1.4 million and increase net income by $87,000.The current earnings per share is ________ and it will be ________ if the project is accepted.

Question

Quizplus · Accepted Answer

Current EPS = $301,000 / 132,000 = $2.28
New shares outstanding = 132,000 + $1,400,000 / $31 = 177,161
New EPS = ($301,000 + $87,000)/ 177,161 = $2.19

Butterfield's Is an All-Equity Firm with 132,000 Shares of Stock