The formula to calculate Earnings Per Share (EPS) is:
\[ \text{EPS} = \frac{\text{Net income} - \text{Dividends on preferred stock}}{\text{Average outstanding common shares}} \]
Earnings Per Share (EPS) is a financial metric that indicates the profitability of a company. It is calculated by dividing the net income (minus dividends on preferred stock) by the average number of outstanding common shares.
Let's assume the following:
To calculate the EPS:
\[ \text{EPS} = \frac{3,120,000,000 - 200,000,000}{333,400,000} = 8.76 \]
Therefore, the Earnings Per Share (EPS) is $8.76. If the company decided to buy back 50 million shares, its value would increase:
\[ \text{EPS} = \frac{3,120,000,000 - 200,000,000}{283,400,000} = 10.30 \]