10 Nov The capital structure of AMEX Products at December
The capital structure of AMEX Products at December 31, 20X5, included 20,000 shares of $1.25 preferred stock and 44,000 shares of common stock. During 20X6, AMEX issued common stock and ended the year with 58,000 shares. The average number of common shares outstanding for the year was 51,000. Income from continuing operations during 20X6 was $81,100. The company discontinued a segment of the business at a gain of $6,630, and an extraordinary item generated a loss of $16,000. All amounts are after income tax. Required 1. Compute AMEX’s earnings per share. Start with income from continuing operations. 2. Analysts believe AMEX can earn its current level of income for the indefinite future. Estimate the market price of a share of AMEX common stock at investment capitalization rates of 7%, 9%, and 11%. Which estimate presumes an investment in AMEX stock is the most risky? How can you tell? View Solution: The capital structure of AMEX Products at December 31 20X5
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