NEW HERE? LEARN MORE
closeclose
Last visit was: 23 Apr 2024, 11:28 It is currently 23 Apr 2024, 11:28
Decision Tracker
My Rewards
New posts
New comers' posts

Close
GMAT Club Daily Prep
Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History
Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.
Go to My Error Log Learn more
Close
Request Expert Reply
Confirm Cancel

A corporation with 5,000,000 shares of publicly traded stock

SORT BY:
Date
Kudos
Tags:
Find Similar Topics 
Show Tags
Hide Tags
User avatar
psychomath
Manager
Manager
Joined: 14 Jun 2010
Posts: 130
Own Kudos [?]: 68 [36]
Given Kudos: 7
Send PM
A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   06 Oct 2010, 09:47
36
Bookmarks
00:00
A
B
C
D
E

Difficulty:

55% (hard)

Question Stats:

67% (02:17) correct 33% (02:54) wrong based on 413 sessions
Hide Show timer Statistics
A corporation with 5,000,000 shares of publicly listed stock reported total earnings of $7.20 per share for the first 9 months of operation. During the final quarter the number of publicly listed shares was increased to 10,000,000 shares, and fourth quarter earnings were reported as $1.25 per share. What are the average annual earnings per share based on the number of shares at the end of the year?

A. 1.75
B. 2.40
C. 3.15
D. 3.60
E. 4.85



Show Spoiler
I basically calculated the annual earnings by multiplying 7.20 with 5*10^6 which is 36 and multiplying 10*10^6 with 1.25 which is 12.5.
Now to find the average, we have to divide the total 48.5 with the total number of shares which is 15 million here. But the solution says divide the total rate i.e. 48.5 with the total outstanding shares which is 10 Million here. Can someone explain the solution for the problem.
TIA


Experience a GMAT Club Test Questions
Yes, you've landed on a GMAT Club Tests question
Craving more? Unlock our full suite of GMAT Club Tests here
Want to experience more? Get a taste of our tests with our free trial today
Rise to the challenge with GMAT Club Tests. Happy practicing!
GMAT Club Tests Check Our Products Try Free Tests
ShowHide Answer
Official Answer
E
Most Helpful Reply
User avatar
L
Bunuel
Math Expert
Joined: 02 Sep 2009
Posts: 92880
Own Kudos [?]: 618564 [9]
Given Kudos: 81561
Send PM
CAT Tests Forum Quiz Mode
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   06 Oct 2010, 09:56
5
Kudos
4
Bookmarks
Expert Reply
psychomath wrote:
A corporation with 5,000,000 shares of publicly traded stock reported total earnings of $7.20 per share for the first 9 months of operation. If during the final quarter, the number of publicly listed shares was increased to 10,000,000, and fourth quarter earnings were reported at $1.25 per share, what are the average annual earnings per share based on the number of shares at the end of the year?
A. 1.75
B. 2.40
C. 3.15
D. 3.60
E. 4.85

OA :
Show Spoiler
E

I basically calculated the annual earnings by multiplying 7.20 with 5*10^6 which is 36 and multiplying 10*10^6 with 1.25 which is 12.5.
Now to find the average, we have to divide the total 48.5 with the total number of shares which is 15 million here. But the solution says divide the total rate i.e. 48.5 with the total outstanding shares which is 10 Million here. Can someone explain the solution for the problem.
TIA


Earnings for 9 months - \(5*7.2=36\);
Earnings for 4th quarter - \(10*1.25=12.5\);

Total earning for a year - \(36+12.5=48.5\);

The average annual earnings per share - \(\frac{48.5}{10}=4.85\).

Answer: E.

Note that # of shares increased to 10 not by 10, so total shares by the end of the year is 10 not 15.
General Discussion
User avatar
L
Bunuel
Math Expert
Joined: 02 Sep 2009
Posts: 92880
Own Kudos [?]: 618564 [2]
Given Kudos: 81561
Send PM
CAT Tests Forum Quiz Mode
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   06 Oct 2010, 10:12
1
Kudos
1
Bookmarks
Expert Reply
psychomath wrote:
OK one small doubt here....While calculating the average, dont we have to divide by THE TOTAL NUMBER OF SHARES ie for 9 months it is 5 million and then it increases to 10, so the total number of shares is 15 million ? Or am i confusing myself badly somewhere :(


# of shares increased to 10 not by 10, so total shares by the end of the year is 10 not 15.

Or in another words: # of shares was 5 and then another 5 was issued thus total # of shares became 10 not 15.
User avatar
jlgdr
VP
VP
Joined: 06 Sep 2013
Posts: 1346
Own Kudos [?]: 2391 [1]
Given Kudos: 355
Concentration: Finance
Schools: Wharton '17 (A) HBS '17 (WA$)
Send PM
GMAT ToolKit User
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   10 Jan 2014, 13:49
1
Kudos
psychomath wrote:
A corporation with 5,000,000 shares of publicly traded stock reported total earnings of $7.20 per share for the first 9 months of operation. If during the final quarter, the number of publicly listed shares was increased to 10,000,000, and fourth quarter earnings were reported at $1.25 per share, what are the average annual earnings per share based on the number of shares at the end of the year?

A. 1.75
B. 2.40
C. 3.15
D. 3.60
E. 4.85

Show Spoiler
I basically calculated the annual earnings by multiplying 7.20 with 5*10^6 which is 36 and multiplying 10*10^6 with 1.25 which is 12.5.
Now to find the average, we have to divide the total 48.5 with the total number of shares which is 15 million here. But the solution says divide the total rate i.e. 48.5 with the total outstanding shares which is 10 Million here. Can someone explain the solution for the problem.
TIA


Don't even think about solving for 5,000,000(7.2) + 10,000,000(1.25) / 10,000,000

Just check out its a weighted average so it will be (1/2)(7.2) + 1.25 = 4.85

E
User avatar
psychomath
Manager
Manager
Joined: 14 Jun 2010
Posts: 130
Own Kudos [?]: 68 [0]
Given Kudos: 7
Send PM
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   06 Oct 2010, 09:47
Sorry its not a percentage problem....Apologies for the wrong heading
User avatar
psychomath
Manager
Manager
Joined: 14 Jun 2010
Posts: 130
Own Kudos [?]: 68 [0]
Given Kudos: 7
Send PM
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   06 Oct 2010, 10:07
OK one small doubt here....While calculating the average, dont we have to divide by THE TOTAL NUMBER OF SHARES ie for 9 months it is 5 million and then it increases to 10, so the total number of shares is 15 million ? Or am i confusing myself badly somewhere :(
User avatar
psychomath
Manager
Manager
Joined: 14 Jun 2010
Posts: 130
Own Kudos [?]: 68 [0]
Given Kudos: 7
Send PM
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   06 Oct 2010, 10:14
Aaahhh...Gotcha!....Damn my understanding and my bird brain...Thanks a ton Bunuel! Kudos!
avatar
harikris
Intern
Intern
Joined: 12 Jul 2012
Posts: 23
Own Kudos [?]: 435 [0]
Given Kudos: 1
Send PM
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   10 Sep 2012, 21:20
Hi Guys,

For this problem why we need to multiply 1.25 by 10 when the existing 5 million shares has already been accounted for in the first 9 months. So my doubt is for the last quarter we just need to consider just the additional 5 millions shares and multiply it by 1.25. Could you please clarify my doubt ?

Thanks,

harikris
User avatar
L
Bunuel
Math Expert
Joined: 02 Sep 2009
Posts: 92880
Own Kudos [?]: 618564 [0]
Given Kudos: 81561
Send PM
CAT Tests Forum Quiz Mode
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   11 Sep 2012, 02:41
Expert Reply
harikris wrote:
Hi Guys,

For this problem why we need to multiply 1.25 by 10 when the existing 5 million shares has already been accounted for in the first 9 months. So my doubt is for the last quarter we just need to consider just the additional 5 millions shares and multiply it by 1.25. Could you please clarify my doubt ?

Thanks,

harikris


We are told that in the fourth quarter, when there were 10,000,000 shares, earnings were $1.25 per share, so total earnings 1.25*10,000,000.

Also discussed here: m03-q27-74196.html
User avatar
jlgdr
VP
VP
Joined: 06 Sep 2013
Posts: 1346
Own Kudos [?]: 2391 [0]
Given Kudos: 355
Concentration: Finance
Schools: Wharton '17 (A) HBS '17 (WA$)
Send PM
GMAT ToolKit User
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   13 Nov 2013, 11:22
psychomath wrote:
A corporation with 5,000,000 shares of publicly traded stock reported total earnings of $7.20 per share for the first 9 months of operation. If during the final quarter, the number of publicly listed shares was increased to 10,000,000, and fourth quarter earnings were reported at $1.25 per share, what are the average annual earnings per share based on the number of shares at the end of the year?

A. 1.75
B. 2.40
C. 3.15
D. 3.60
E. 4.85

Show Spoiler
I basically calculated the annual earnings by multiplying 7.20 with 5*10^6 which is 36 and multiplying 10*10^6 with 1.25 which is 12.5.
Now to find the average, we have to divide the total 48.5 with the total number of shares which is 15 million here. But the solution says divide the total rate i.e. 48.5 with the total outstanding shares which is 10 Million here. Can someone explain the solution for the problem.
TIA


Fairly straightforward.

5000000(7.2)*1000000(1.25) / 1000000

7.2/2 + 1.25 = 4.85
Answer is E

Kudos Rain!
Cheers
J :)
User avatar
P
JeffTargetTestPrep
Target Test Prep Representative
Joined: 04 Mar 2011
Status:Head GMAT Instructor
Affiliations: Target Test Prep
Posts: 3043
Own Kudos [?]: 6270 [0]
Given Kudos: 1646
Send PM
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   05 Apr 2018, 11:13
Expert Reply
psychomath wrote:
A corporation with 5,000,000 shares of publicly traded stock reported total earnings of $7.20 per share for the first 9 months of operation. If during the final quarter, the number of publicly listed shares was increased to 10,000,000, and fourth quarter earnings were reported at $1.25 per share, what are the average annual earnings per share based on the number of shares at the end of the year?

A. 1.75
B. 2.40
C. 3.15
D. 3.60
E. 4.85


Note that we are basing the average annual earnings per share on the number of shares at the end of the year.

Thus, when the number of shares was doubled, from 5,000,000 to 10,000,000, the per-share earnings from the first 9 months had to be halved; thus

(7.2/2) + 1.25 = 3.6 + 1.25 = 4.85.

Answer: E
User avatar
P
jabhatta2
VP
VP
Joined: 15 Dec 2016
Posts: 1376
Own Kudos [?]: 207 [0]
Given Kudos: 189
Send PM
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   03 Sep 2021, 07:48
JeffTargetTestPrep wrote:
psychomath wrote:
A corporation with 5,000,000 shares of publicly traded stock reported total earnings of $7.20 per share for the first 9 months of operation. If during the final quarter, the number of publicly listed shares was increased to 10,000,000, and fourth quarter earnings were reported at $1.25 per share, what are the average annual earnings per share based on the number of shares at the end of the year?

A. 1.75
B. 2.40
C. 3.15
D. 3.60
E. 4.85


Note that we are basing the average annual earnings per share on the number of shares at the end of the year.

Thus, when the number of shares was doubled, from 5,000,000 to 10,000,000, the per-share earnings from the first 9 months had to be halved; thus

(7.2/2) + 1.25 = 3.6 + 1.25 = 4.85.

Answer: E

JeffTargetTestPrep - How can you just add the 3.6 + 1.25 ?

Should it not be (3.6+1.25)/2 ?

Please explain the conceptual thinking about why you can just add 3.6 + 1.25 to get to the anwer.
User avatar
P
Oppenheimer1945
Director
Director
Joined: 16 Jul 2019
Posts: 523
Own Kudos [?]: 196 [0]
Given Kudos: 146
Send PM
Forum Quiz Mode
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   12 Mar 2023, 09:21
Bunuel wrote:
psychomath wrote:
A corporation with 5,000,000 shares of publicly traded stock reported total earnings of $7.20 per share for the first 9 months of operation. If during the final quarter, the number of publicly listed shares was increased to 10,000,000, and fourth quarter earnings were reported at $1.25 per share, what are the average annual earnings per share based on the number of shares at the end of the year?
A. 1.75
B. 2.40
C. 3.15
D. 3.60
E. 4.85

OA :
Show Spoiler
E

I basically calculated the annual earnings by multiplying 7.20 with 5*10^6 which is 36 and multiplying 10*10^6 with 1.25 which is 12.5.
Now to find the average, we have to divide the total 48.5 with the total number of shares which is 15 million here. But the solution says divide the total rate i.e. 48.5 with the total outstanding shares which is 10 Million here. Can someone explain the solution for the problem.
TIA


Earnings for 9 months - \(5*7.2=36\);
Earnings for 4th quarter - \(10*1.25=12.5\);

Total earning for a year - \(36+12.5=48.5\);

The average annual earnings per share - \(\frac{48.5}{10}=4.85\).

Answer: E.

Note that # of shares increased to 10 not by 10, so total shares by the end of the year is 10 not 15.


Bunuel
Is this correct?
I did wt. avg for 9 month earnings and 3 month earnings.

Wt avg EPS= (7.2 x 5 x 3 + 1.25 x 10 )/(5x3+10)=121.5/25=4.86
User avatar
L
Bunuel
Math Expert
Joined: 02 Sep 2009
Posts: 92880
Own Kudos [?]: 618564 [0]
Given Kudos: 81561
Send PM
CAT Tests Forum Quiz Mode
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   12 Mar 2023, 10:36
Expert Reply
samagra21 wrote:
Bunuel wrote:
psychomath wrote:
A corporation with 5,000,000 shares of publicly traded stock reported total earnings of $7.20 per share for the first 9 months of operation. If during the final quarter, the number of publicly listed shares was increased to 10,000,000, and fourth quarter earnings were reported at $1.25 per share, what are the average annual earnings per share based on the number of shares at the end of the year?
A. 1.75
B. 2.40
C. 3.15
D. 3.60
E. 4.85

OA :
Show Spoiler
E

I basically calculated the annual earnings by multiplying 7.20 with 5*10^6 which is 36 and multiplying 10*10^6 with 1.25 which is 12.5.
Now to find the average, we have to divide the total 48.5 with the total number of shares which is 15 million here. But the solution says divide the total rate i.e. 48.5 with the total outstanding shares which is 10 Million here. Can someone explain the solution for the problem.
TIA


Earnings for 9 months - \(5*7.2=36\);
Earnings for 4th quarter - \(10*1.25=12.5\);

Total earning for a year - \(36+12.5=48.5\);

The average annual earnings per share - \(\frac{48.5}{10}=4.85\).

Answer: E.

Note that # of shares increased to 10 not by 10, so total shares by the end of the year is 10 not 15.


Bunuel
Is this correct?
I did wt. avg for 9 month earnings and 3 month earnings.

Wt avg EPS= (7.2 x 5 x 3 + 1.25 x 10 )/(5x3+10)=121.5/25=4.86


5,000,000 shares earned $7.20 per share for the first 9 months of operation (not per month, not per quarter, during the entire 9 months period). So, you should not multiply by 3.
10,000,000 shares earned $1.25 per share for the next 3 months of operation (not per month, not per quarter, during the entire 3 months period).
User avatar
P
Oppenheimer1945
Director
Director
Joined: 16 Jul 2019
Posts: 523
Own Kudos [?]: 196 [0]
Given Kudos: 146
Send PM
Forum Quiz Mode
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   12 Mar 2023, 10:49
Quote:
5,000,000 shares earned $7.20 per share for the first 9 months of operation (not per month, not per quarter, during the entire 9 months period). So, you should not multiply by 3.
10,000,000 shares earned $1.25 per share for the next 3 months of operation (not per month, not per quarter, during the entire 3 months period).


I agree CFA L1 taught the method you used,
Then how come using the weighted avg method I am getting the exact same answer?

So effectively, it the question was on earnings of 7.2 in 1st 6 months , and 1.25 in next 6 months, the answer would come out to be the same?
User avatar
bumpbot
Non-Human User
Joined: 09 Sep 2013
Posts: 32627
Own Kudos [?]: 821 [0]
Given Kudos: 0
Send PM
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink] New post   14 Mar 2024, 09:56
Hello from the GMAT Club BumpBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.
GMAT Club Bot
gmatclubot
Re: A corporation with 5,000,000 shares of publicly traded stock [#permalink]
14 Mar 2024, 09:56
Moderators:
Bunuel
Math Expert
92875 posts
yashikaaggarwal
Senior Moderator - Masters Forum
3137 posts

Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne
Main navigation
GMAT Resources
Partners
MBA Resources
www.gmac.com|www.mba.com | | GMAT Club Rules | Terms and Conditions