Phil's Corp. (PC) reported AT Earnings of $15,000,000. PC has 2,150,000 shares outstanding and has excess cash on hand of $5,500,000. PC stock is currently trading at $62 a share.
-PC's EPS after any share repurchase would be ________.

Question

Quizplus · Accepted Answer

- First, we need to calculate EPS before any share repurchases:

EPS = AT Earnings / Shares Outstanding 
EPS = $15,000,000 / 2,150,000 
EPS = $6.98

- Next, we need to adjust EPS for the excess cash on hand:

Adjusted EPS = EPS + (Excess Cash / Shares Outstanding) 
Adjusted EPS = $6.98 + ($5,500,000 / 2,150,000) 
Adjusted EPS = $9.69

- Finally, we need to calculate the EPS after share repurchases, assuming that all excess cash will be used to buy back shares at the current price of $62 per share:

Shares to Repurchase = Excess Cash / Current Share Price 
Shares to Repurchase = $5,500,000 / $62 
Shares to Repurchase = 88,710

New Shares Outstanding = Shares Outstanding - Shares Repurchased 
New Shares Outstanding = 2,150,000 - 88,710 
New Shares Outstanding = 2,061,290

EPS after Share Repurchase = AT Earnings / New Shares Outstanding 
EPS after Share Repurchase = $15,000,000 / 2,061,290 
EPS after Share Repurchase = $7.28

Therefore, the answer is C) $7.28.