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How to demonstrate earnings per share is

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Consider the following alternative projects. Each project would last for five years.

                                            Project A                   Project B

Initial investment                           $80,000                $60,000

Annual net cash inflows                    20,000                   16,000

Salvage value                                       10,000                    8,000

Question 1: The company uses a discount rate of 14% to evaluate projects. Which of the following statements is true?

Option 1: NPV of Project B > NPV of Project A by $5,230

Option 2: NPV of Project B > NPV of Project A by $2,000

Option 3: NPV of Project A > NPV of Project B by $5,230

Option 4: NPV of Project A > NPV of Project B by $2,000

Question 2: The income statement for Nadeen, Inc. shows income before income taxes $700,000, income tax expense $210,000, and net income $590,000. If Nadeen has 100,000 shares of common stock outstanding throughout the year, earnings per share is:

Option 1: $7.00.

Option 2: $2.10.

Option 3: $5.90.

Option 4: No correct answer is given.

Reference no: EM132572544

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