MINI-CASE
Zitko Inc.is a manufacturer of consumer goods products.It has 75 million shares in the market and generates a net profit of $125 million.Its stock price is $60 and it has a capital cost of 10% for $850 million of capital invested.Its other expenses,including interest and taxes,amount to $240 million.
-Mini-Case Question.Calculate the earnings per share of Zitko Inc.

Question

Quizplus · Accepted Answer

Earnings per share (EPS) is calculated as the net profit (after interest and taxes) divided by the number of shares outstanding.

Net profit = $125 million

Other expenses = $240 million

Total capital invested = $850 million

Capital cost = 10%

So, the capital cost is $850 million x 10% = $85 million.

Therefore, the earnings before interest and taxes (EBIT) is:

EBIT = Net profit + Other expenses + Capital cost
= $125 million + $240 million + $85 million
= $450 million

Now, we can use the formula for EPS:

EPS = Net profit / Number of shares outstanding
= $125 million / 75 million shares
= $1.67 per share

Therefore, the best choice for the earnings per share of Zitko Inc. is B) $1.7 per share.

MINI-CASE Zitko Inc.is a Manufacturer of Consumer Goods Products.It Has 75