Candy Corporation has pretax profits of $1.2 million, an average tax rate of 34 percent, and it pays preferred dividends of $50,000. There are 100,000 shares outstanding and no interest expenses. What is Candy Corporation's earnings per share?

Question

Quizplus · Accepted Answer

First, calculate the after-tax profits:
$1,200,000 x (1-0.34) = $792,000

Then subtract the preferred dividends:
$792,000 - $50,000 = $742,000

Finally, divide by the number of outstanding shares:
$742,000 / 100,000 = $7.42

Therefore, the correct answer is C.

Candy Corporation Has Pretax Profits of $1