Security Analysts Following the Witczak Corporation Use a Simplified Income-Statement

question 86

Short Answer

Security analysts following the Witczak Corporation use a simplified income-statement method of forecasting. Assume that current sales are $30 million, and are expected to grow by 10.5% in year 1 and 2. The after-tax profit margin is projected at 7% in year 1, and 7.2% in year 2. The number of shares outstanding is anticipated to be 450,000 for year 1, and 500,000 for year 2. Calculate the project earnings per share for the next two years.

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Definitions:

Comparative Advantage

The ability of an individual, firm, or country to produce a certain good at a lower opportunity cost than its trading partners.

Total Output

Total output refers to the total value of all goods and services produced in an economy over a specific period.

Specialization

The process by which individuals or entities focus on producing a single or a few products or services, leading to increased efficiency and productivity in the economy.

Opportunity Cost

The economic consequence of overlooking the following preferred choice in making a decision.