See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco repurchases 1.9 million shares each year from 2016 to 2019. What would be its earnings per share in 2019? (Assume Mydeco pays for the shares using its available cash and that Mydeco earns no interest on its cash balances.)
See Table 2.5 showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco repurchases 1.9 million shares each year from 2016 to 2019. What would be its earnings per share in 2019? (Assume Mydeco pays for the shares using its available cash and that Mydeco earns no interest on its cash balances.)
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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See Table 2.5
showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco repurchases 1.9 million shares each year from 2016 to 2019. What would be its earnings per share in 2019? (Assume Mydeco pays for the shares using its available cash and that Mydeco earns no interest on its cash balances.)
Transcribed Image Text:See Table 2.5 E showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco repurchases 1.9 million shares each year from 2016 to 2019. What
would be its earnings per share in 2019? (Assume Mydeco pays for the shares using its available cash and that Mydeco earns no interest on its cash balances.)
ior
ale
res
(Select the best choice below.)
O A. A repurchase does not impact earnings directly, so any change to EPS will come from a reduction in shares outstanding. 2019 shares outstanding
= 53.1 million -4x1.9 million = 45.5 million, EPS=$28.5 million / 45.5 million = $0.63.
O B. Arepurchase does not impact earnings directly, so any change to EPS will come from an increase in shares outstanding. 2019 shares outstanding
= 53.1 million+4x1.9 million = 51.2 million, EPS = $14.2 million /51.2 million = $0.28.
O C. Arepurchase does not impact earnings directly, so any change to EPS will come from an increase in shares outstanding. 2019 shares outstanding
= 53.1 million+4x1.9 million = 51.2 million. EPS = $28.5 million /512 million = $0. 56.
O D. Arepurchase does not impact earnings directly, so any change to EPS will come from a reduction in shares outstanding. 2019 shares outstanding
= 53,1 million - 4x1.9 million = 45,5 million, EPS = $14.2 million / 45.5 million = $0.31.
Transcribed Image Text:2015-2019 Financial Statement Data and Stock Price Data for Mydeco Corp.
(All data as of fiscal year end; in $ millions)
Income Statement
2015
2016
2017
2018
2019
Revenue
404.3
364.3
425.5
510.3
606.9
(186.7)
217 6
Cost of Goods Sold
(172.5)
(207.9)
(249.3)
(295.9)
Gross Profit
Sales and Marketing
191.8
217.6
261.0
311.0
(68.3)
(62.3)
(26.9)
(68.3)
(59.2)
(29.0)
(81.2)
(60.2)
(33.2)
(98.7)
(67.3)
(38.9)
56.1
(116.5)
(77.8)
(37.6)
Administration
Depreciation & Amortization
EBIT
60.1
35.3
43.0
79.1
Interest Income (Expense)
(32.9)
27.2
(32.3)
(31.7)
(37.1)
(41.1)
Pretax Income
3.0
11.3
19.0
38.0
Income Tax
(6.8)
(0.8)
(2.8)
(4.8)
14.2
(9.5)
Net Income
20.4
2.2
8.5
28.5
Shares Outstanding (millions)
Earnings per Share
Balance Sheet
53.1
53.1
53.1
53.1
53.1
$0.38
$0.04
$0. 16
$0.27
$0.54
2015
2016
2017
2018
2019
Assets
Cash
48.4
61.2
83.5
70.9
87.4
Accounts Receivable
86.8
70.7
69.4
76.8
84.5
Inventory
32.4
31.9
26.6
33.6
34.8
Total Current Assets
167.6
163.8
179.5
181.3
206.7
Net Property, Plant & Equipment
Goodwill & Intangibles
242.2
244.6
313.9
344.4
345.3
362.6
362.6
362.6
362.6
362.6
Total Assets
772.4
771.0
856.0
888.3
914.6
Liabilities & Stockholders' Equity
Accounts Payable
Accrued Compensation
17.8
16.6
23.7
28.4
31.6
7.3
6.1
6.8
7.1
10.5
Total Current Liabilities
25.1
22.7
30.5
35.5
42.1
Long-Term Debt
497.2
497.2
571.1
597.9
597.9
Total Liabilities
Stockholders' Equity
522.3
519.9
601.6
633.4
640.0
250.1
251.1
254.4
254.9
274.6
Total Liabilities & Stockholders'
772.4
771.0
856.0
888.3
914.6
Equity
Statement of Cash Flows
2015
2016
2017
2018
2019
Net Income
20.4
2.2
8.5
14.2
28.5
Depreciation & Amortization
Change in Accounts Receivable
Change in Inventory
Change in Pay. & Accrued Comp.
Cash from Operations
Capital Expenditures
Cash from Investing Activ.
Dividends Paid
26.9
29.0
33.2
38.9
37.6
3.9
16.1
1.3
(2.9)
1.2
(7.4)
(7.0)
(7.7)
(1.2)
0.5
5.3
(2.4)
7.8
5.0
6.6
49.5
45.4
56.1
43.7
63.8
(27.0)
(27.0)
(6.4)
(26.2)
(26.2)
(6.4)
(101.3)
(101.3)
(6.4)
(76.7)
(76.7)
(6.4)
(41.0)
(41.0)
(6.3)
Sale (or Purchase) of Stock
Debt Issuance (Pay Down)
Cash from Financing Activ.
Change in Cash
Mydeco Stock Price
73.9
26.8
(6.4)
(6.4)
12.8
67.5
20.4
(6.3)
16.5
16.1
22.3
(12.6)
$8.42
$3.08
$6.24
$8.57
$9.14
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