A ﬁrm has earnings per share of $2.12 on 40,000 shares outstanding. The ﬁrm also has $360,000 in debt at a cost of 9%. Ignore taxes. What is the EBIT?
A) $84,800
B) $91,600
C) $102,300
D) $117,200
E) $119,700

Question

Quizplus · Accepted Answer

The firm's earnings per share (EPS) is $2.12, and with 40,000 shares outstanding, the net income is $2.12 * 40,000 = $84,800. The interest on the debt is $360,000 * 9% = $32,400. EBIT is calculated as net income + interest, so EBIT = $84,800 + $32,400 = $117,200.

A ﬁRm Has Earnings Per Share of $2