Ornaments, inc., is an all-equity firm with a total market value of $531,000 and 19,600 shares of stock outstanding. management believes the earnings before interest and taxes (ebit) will be $74,700 if the economy is normal. if there is a recession, ebit will be 15 percent lower, and if there is a boom, ebit will be 25 percent higher. the tax rate is 34 percent. what is the eps in a recession

The EPS in recession is 2.14 $/share.

Explanation:

If there is a recession, EBIT will be 15% lower than $74,700.

That means an EBIT of $74,700*(1-0.15)=$63,495.

The net income that will be paid in dividends is

Net income = EBIT*(1-tax rate) = $ 63,495 * (1-0.34) = $ 41,906.7

If there are 19,600 shares of stock outstanding and no preferred dividends, the EPS can be calculated as

EPS = (Net dividend pay / common shares) = 41,906.7 / 19,600

EPS = 2.14 $/share.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.