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 earnings per share = Net income / Number of shares
Current earnings per share = $301,000 / 132,000 = $2.28

If the project is accepted, new net income would be $301,000 + $87,000 = $388,000
New earnings per share = New net income / Number of shares
New earnings per share = $388,000 / 132,000 = $2.93

Therefore, the earnings per share if the project is accepted would be $2.93.

The question asks for the current earnings per share and the earnings per share if the project is accepted. The values are:

Current earnings per share = $2.28
Earnings per share if the project is accepted = $2.93

The best choice is D, which has both values correctly.

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