Allen Lumber Company had earnings after taxes of $600,000 in the year 2021 with 200,000 shares outstanding. On October 1, 2022, the firm issued 40,000 new shares. The company took the proceeds from these new shares as well as other operating improvements and earnings after taxes improved by 20% in 2022.

Calculate Earnings per share for the year 2022.[Show detailed calculation with the formula to get proper credit]

2.

delaide Winery Inc. had a net income before taxes of $300,000 and sales of $1,500,000 in 2022. If it is in the 30% tax bracket, calculate its after-tax profit margin. [Show detailed calculation with a formula to get proper credit]

3.

Brady Adams Furniture Inc. has forecasted sales of $300,000 in October, $360,000 in November, and $480,000 in December. All sales are on credit. 20% is collected the month of sale and the remainder the following month.

Calculate the amount collected from accounts receivable in the month of November.

[Show detailed calculation to get proper credit]

4.

The following is the income statement for Economical Footwear Company for the year 2022. The company is planning to expand production. The expansion will cost $400,000, which can either be financed by bonds at an interest rate of 12 percent or by selling 2,000 shares @ $200 per share.

Sales (30,000 units)	$150,000
Variable costs	60,000
Contribution margin	90,000
Fixed manufacturing costs	44,000
Operating income (EBIT)	46,000
Interest expense	18,000
Net Incomebefore taxes (EBT)	28,000
Taxes (at 30%)	8,400
Net income (EAT)	$19,600
Shares outstanding	10,000

After expansion, sales are expected to increase by $100,000. Variable costs will remain at 30 percent of sales, and the fixed manufacturing cost will increase to $60,000.

Required: Calculate the following(to get proper credit, show detailed calculation including formula used)

A)Break-Even in units (Assume interest as a fixed expense)[4 Marks]

B)Calculate the Degree of Operating Leverage (DOL) and Degree of Financial Leverage (DFL) before expansion[4 Marks]

C)Prepare Income Statements for the two financial plans.[8 Marks]

D)Calculate EBIT/EPS indifference point[4 Marks]

Answer rating: 100% (QA)

1 Calculation of Earnings per Share EPS for the year 2022 Earnings after taxes in 2021 600000 Shares outstanding in 2021 200000 New shares issued in 2022 40000 Total shares outstanding in 2022 200000 ... View the full answer