Pacific Airlines operated both an airline and several rental car operations located near airports. During the year just ended, all rental car operations were discontinued and the following operating results were reported.

Continuing operations (airline):
Net sales........................................................................................................................$61,440,000
Costs and expenses (including income taxes on continuing operations)........................53,980,000
Other data:
Operating income from car rentals (net of income tax)........................................................670,000
Gain on sale of rental car business (net of income tax)....................................................4,330,000
Nonrecurring loss..............................................................................................................1,500,000

All of these amounts are before income income taxes unless indicated otherwise. The company’s income tax rate is 40 percent. The nonrecurring loss resulted from the destruction of an airliner by fire and is not related to the discontinued operations. Pacific Airlines had 4,000,000 shares of capital stock outstanding throughout the year.

Instructions

a. Prepare a condensed income statement, including proper presentation of the discontinued rental car operations and the nonrecurring loss. Include all appropriate earnings per share figures.

b. Assume that you expect the profitability of Pacific’s airline operations to decline by 8 percent next year and the profitability of the rental car operation to decline by 10 percent. What is your estimate of the company’s net earnings per share next year?