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Susan Hines has developed an estimate of the earnings per share for her firm for the next year using the following parameters. Sales $20 million Cost of goods sold 70% of sales General & administrative expenses $300,000 Selling expense $100,000 plus 10% of sales Debt outstanding $5 million @ 8% interest rate Effective tax rate 35% Common shares outstanding 2 million She is now interested in the sensitivity of earnings per share to sales forecast changes. A 10% sales increase would increase earnings per share by A. 7.0 cents per share. B. 10.4 cents per share. C. 13.0 cents per share. D. 20.0 cents per share. |