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Nielson expects to generate net income of $20 million over the next year. Currently Nielson has 8...

Question:

Nielson expects to generate net income of $20 million over the next year. Currently Nielson has 8 million shares outstanding and its stock is trading at $20.00 per share.

Nielson's EPS is closest to:

a. $2.00.

b. $2.30.

c. $2.50.

d. $2.90.

Earnings per share:

The prospective investors look into the earnings per share of the company to make a decision about whether to invest in the company stock. The earnings per share are higher than the market value of share normally increases, and there are two methods of calculating the earning per share, the basic EPS, and diluted EPS.

Answer and Explanation:

The information required for EPS are as follows

  • The net income is $20 million
  • The number of outstanding shares is 8 million

The earnings per share will be calculated by using the formula below

EPS = net income / number of outstanding shares
=$20 / 8
=$2.50

The Nielson's EPS is closest to $2.50 and the answer is C


Learn more about this topic:

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How to Calculate Earnings Per Share: Definition & Formula

from Introduction to Business: Homework Help Resource

Chapter 24 / Lesson 14
111K

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