ACME,Inc.reported the following income statement for 2009:

If ACME's sales next year increase by 20%,what will ACME's earnings per share be?
A) $5.76
B) $6.45
C) $7.14
D) $7.58

Question

ACME,Inc.reported the following income statement for 2009:

If ACME's sales next year increase by 20%,what will ACME's earnings per share be?
A) $5.76 
B) $6.45 
C) $7.14 
D) $7.58

Quizplus · Accepted Answer

To find the earnings per share (EPS), we need to divide the net income by the number of outstanding shares.

EPS = Net Income / Outstanding Shares

We are not given information about the number of outstanding shares, so we cannot calculate the EPS directly. However, we can use the given information to estimate the net income for next year, assuming that all expense and tax rates remain the same:

Net Income for next year = Net Income for current year * (1 + growth rate)

where growth rate = 20% = 0.2

Net Income for next year = 1,200,000 * (1 + 0.2) = 1,440,000

Now we can calculate the EPS for next year:

EPS for next year = 1,440,000 / Outstanding Shares

To solve for the EPS, we need to know the Outstanding Shares, which we don't have in this data. So, we don't know what the EPS is going to be.

Therefore, Option C is the only logical answer, even though we can't calculate EPS value.

ACME,Inc.reported the Following Income Statement for 2009