Reading 56 Problem and deficiency

[c_hayhurst]

Urge to kill, rising...

Okay, the book's answer to problem 3A in Reading 56 makes no sense. It says that to find a stock's EPS, you start with the value of $850. That value is not part of the given information and I cannot seem to derive that value from any of the given info. The problem gives the value for sales as $1020. The % difference between 1020 and 850 is either 16.67% or 20% depending on how you order the 2 values (1020-850/1020, or 1020-850/850). And by playing with the profit margin and tax rates, I still can't see how the book decides the base value of EBIT to be 850.

What the hell am I missing?

GAAAHHHH!!!

 

[jamespucyk]

Dude, don't stress, all the numbers are off here, those answer are olbviously incorrect for all of question 3; they probibly altered the question a bit and forgot to chage the solutions.

The correct way to access EPS is as follows:
([Sales * (Operating Profit Margin)] - Dep - Int ) * (1-t) / # shares

[(1020 * 0.152) - 45 -18 ] * .68 = 62.5872/share = EPS

All figures at the back of the book are different with the exception of T and OPM

 

[c_hayhurst]

I agree with you totally on your figures. The confirmation is much appreciated. Seeing things like that scares the hell out of me, thinking I am totally missing the concepts the curriculum is trying to teach.

It would seem that if we are going to give them $500 for the curriculum plus $300-$700 in exam filing fees for each of three tests, the least they could do is make sure the problems they would ilke us to know would be correct so we can confirm we are actually absorbing the material. I know! Maybe it is their way of testing us to make sure we *really* know what we are doing by purposely putting in the wrong answers. :/

 

[jamespucyk]

Ya I hear you, that would freak me out especially if I had just got through FSA for the first time.