Candy Corporation had pretax profits of $1.2 million, an average tax rate of 34 percent, and it paid preferred stock dividends of $50,000. There were 100,000 shares outstanding and no interest expense. What were Candy Corporation's earnings per share?

Question

Quizplus · Accepted Answer

First, we need to calculate the after-tax profits:

$1.2 million x (1 - 0.34) = $0.792 million

Then, we need to subtract the preferred stock dividends:

$0.792 million - $50,000 = $0.742 million

Finally, we can calculate the earnings per share:

$0.742 million / 100,000 shares = $7.42

Therefore, the correct answer is C.

Candy Corporation Had Pretax Profits of $1