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Elite Trailer Parks has an operating profit of \(200,000. Interest expense for the year was \)10,000; preferred dividends paid were \(18,750; and common dividends paid were \)30,000. The tax was $61,250. The firm has 20,000 shares of common stock outstanding.

a. Calculate the earnings per share and the common dividends per share for

Elite Trailer Parks.

b. What was the increase in retained earnings for the year?

Short Answer

Expert verified

a. The earnings per share and dividends per share are $5.5 and $1.5 respectively.

b. The increment in retained earnings is $80,000.

Step by step solution

01

Calculation of earning available for equity shareholders

Earningavailableforshareholders=Operatingprofit-Interestexpense-Tax-Preffereddividend=$200,000-$10,000-$61,250-$18,750=$110,000

02

Calculation of earning per share

EPS=EarningsavailableforshareholdersNo.ofsharesoutstanding=$110.00020,000=$5.5

03

Calculation dividend per share

DPS=EquitydividendNo.ofsharesoutstanding=$30,00020,000=$1.5

04

Increment in the retained earnings

Incrementintheretainedearnings=Earningsavailableforshareholder-DividendPaid=$110,000-$30,000=$80,000

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