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Sir. Hello again:)
when calculating EPS we using Earnings (PAIT) profit after interest and tax right?
quesion given:
Extracts from Kerruish Co’s most recent financial statements are shown below.
$000
Profit before taxation 2,214
Taxation 664
Profit after taxation 1,550
Dividends 620The ordinary shares have a nominal value of $0.75 each and are currently valued in the market at $4.20 each. The bonds have a nominal value of $100, a coupon rate of 6% and are currently valued at $112.50. The bank loans are repayable in 10 years’ time and incur an interest charge of 5%. The preference shares have a nominal value of $1 each and a current market value of $0.96. Preference share dividends are paid out annually.
Calculate Kerruish Co’s earnings per share for the year, in dollars to the nearest cent.
Answers: Profit after tax less div on Pref shares divided by number of ordinary shares;
Why dont they deducting all the interest payables available??? On loan notes of 5%, on Bonds…Totally confused its misprint or its me..
Please help
Thank you.sorry sir. Got it now. They gave Profit after tax having already deducted Interest but not showing it. I guess examiner test here on knowledge of Operating Profit less 1)first Interest 2)then Tax…SOOOO confusing though((:
3)Little question here sir:
Book value of Bank loan is 5300. And we need to calculate MV’s of whole debt.
in answers it says Use Book value for Bank loan. Isnt it discounted if its repaid in 10 years time?? In 10 years 5000 million is gonna be worth much less though? and under which Required Investors Return we need to discount it?
I used 5% interest for 10 years redeemable in 10 years time.under 5% K(d) discounting factors and ive got 5300!!! Is it coincidence??
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