Please help with this question. My understanding is that operating profit margin (40% as given here) equals EBIT/Sales and is therefore net of depreciation. However the answer requires deducting depreciation (given as 1.95/share) from operating profit to determine EPS. The answer is A, EPS=$4.19.
Marie Vaszquez a semiconductor analyst with Smith, Kleen 8- Beetchnutty, has been working on a
determination of an EPS figure for a semiconductor index. In her analysis, she has found the
following:
1. Regressing sales for the series against Nominal GDP, the sales figure forthe index has been
estimated at: $22.14.
2. Analyzing capacity utilization rates, foreign competition, rates of inflation and unit labor costs, the
operating profit margin for the series has been determined to be: 40%.
3. Creating a time series based upon inputs such as levels of capital expenditures and PP&E
turnover, next year’s depreciation-per-share has been determined to be: $1.95.
4. Creating a time series based upon levels of debt outstanding and prevailing debt yields, the
interest expense for next year is determined to be: $0.23 per share.
5. Coordinating his research with a legislative consultant, the corporate tax rate forthis series has
been estimated at: 37.3%.
Using this information, what is the EPS figure forthis stock market series’?
A. $4.19
B. $6.14
C. $2.49
Marie Vaszquez a semiconductor analyst with Smith, Kleen 8- Beetchnutty, has been working on a
determination of an EPS figure for a semiconductor index. In her analysis, she has found the
following:
1. Regressing sales for the series against Nominal GDP, the sales figure forthe index has been
estimated at: $22.14.
2. Analyzing capacity utilization rates, foreign competition, rates of inflation and unit labor costs, the
operating profit margin for the series has been determined to be: 40%.
3. Creating a time series based upon inputs such as levels of capital expenditures and PP&E
turnover, next year’s depreciation-per-share has been determined to be: $1.95.
4. Creating a time series based upon levels of debt outstanding and prevailing debt yields, the
interest expense for next year is determined to be: $0.23 per share.
5. Coordinating his research with a legislative consultant, the corporate tax rate forthis series has
been estimated at: 37.3%.
Using this information, what is the EPS figure forthis stock market series’?
A. $4.19
B. $6.14
C. $2.49