Donnell Corp. had 100,000 shares of 8% preferred stock, $100 par, and 500,000 shares of $1 par common stock outstanding throughout the year. Net income for the year was $4,800,000, and Donnell declared and distributed a cash dividend of $4 per share on its common stock. Earnings per share amounted to:

Question

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Earnings per share (EPS) is calculated by subtracting preferred dividends from net income and then dividing by the number of common shares. Preferred dividends = 100,000 shares * $100 * 8% = $800,000. Net income available to common shareholders = $4,800,000 - $800,000 = $4,000,000. EPS = $4,000,000 / 500,000 shares = $8.00.