On December 31, 2020, Dow Steel Corporation had 740,000 shares of common stock and 314,000 shares of 10%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 5% common stock dividend on May 15 and paid cash dividends of $540,000 and $83,000 to common and preferred shareholders, respectively, on December 15, 2021. On February 28, 2021, Dow sold 68,000 common shares. In keeping with its long-term share repurchase plan, 3,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2021, was $2,800,000. The income tax rate is 25%. As part of an incentive compensation plan, Dow granted incentive stock options to division managers at December 31 of the current and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows: Date Granted December 31, 2019 December 31, 2020 December 31, 2021 Options Granted (adjusted for the stock dividend) 21,000 16,000 19,500 Share Price $34 $43 $42 The market price of the common stock averaged $42 per share during 2021. Required: Compute Dow's earnings per share for the year ended December 31, 2021. (Do not round intermediate calculations. Enter your answers in thousands. Round "Earnings per share" answers to 2 decimal places.) Earnings per share Numerator Denominator Dow's basic $ 2,717,000 / 1,333,667 2$ 2.04 Dow's diluted
On December 31, 2020, Dow Steel Corporation had 740,000 shares of common stock and 314,000 shares of 10%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 5% common stock dividend on May 15 and paid cash dividends of $540,000 and $83,000 to common and preferred shareholders, respectively, on December 15, 2021. On February 28, 2021, Dow sold 68,000 common shares. In keeping with its long-term share repurchase plan, 3,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2021, was $2,800,000. The income tax rate is 25%. As part of an incentive compensation plan, Dow granted incentive stock options to division managers at December 31 of the current and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted and common share prices follows: Date Granted December 31, 2019 December 31, 2020 December 31, 2021 Options Granted (adjusted for the stock dividend) 21,000 16,000 19,500 Share Price $34 $43 $42 The market price of the common stock averaged $42 per share during 2021. Required: Compute Dow's earnings per share for the year ended December 31, 2021. (Do not round intermediate calculations. Enter your answers in thousands. Round "Earnings per share" answers to 2 decimal places.) Earnings per share Numerator Denominator Dow's basic $ 2,717,000 / 1,333,667 2$ 2.04 Dow's diluted
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:On December 31, 2020, Dow Steel Corporation had 740,000 shares of common stock and 314,000 shares of 10%, noncumulative,
nonconvertible preferred stock issued and outstanding. Dow issued a 5% common stock dividend on May 15 and paid cash dividends
of $540,000 and $83,000 to common and preferred shareholders, respectively, on December 15, 2021.
On February 28, 2021, Dow sold 68,000 common shares. In keeping with its long-term share repurchase plan, 3,000 shares were
retired on July 1. Dow's net income for the year ended December 31, 2021, was $2,800,00o0. The income tax rate is 25%.
As part of an incentive compensation plan, Dow granted incentive stock options to division managers at December 31 of the current
and each of the previous two years. Each option permits its holder to buy one share of common stock at an exercise price equal to
market value at the date of grant and can be exercised one year from that date. Information concerning the number of options granted
and common share prices follows:
Date Granted
December 31, 2019
December 31, 2020
December 31, 2021
Options Granted
(adjusted for the stock dividend)
21,000
16,000
19,500
Share Price
$34
$43
$42
The market price of the common stock averaged $42 per share during 2021.
Required:
Compute Dow's earnings per share for the year ended December 31, 2021. (Do not round intermediate calculations. Enter your
answers in thousands. Round "Earnings per share" answers to 2 decimal places.)
Earnings per
share
Numerator
Denominator
Dow's basic
$
2,717,000 /
1,333,667
2.04
Dow's diluted
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