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Post subject: A corporation: GMAT Prep  Posted: Mon Jan 26, 2009 7:15 pm |
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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) $1.83
(B) $2.43
(C) $4.85
(D) $8.45
(E) $9.70
OA C
I started by calculating the total earning ( # shares X $/per share ).
Then, thought Total Dollar/Total Share = ans
Not so. Can some please help. I am thinking this is probably weighted average.
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Post GMAT Stress Syndrome
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Post subject: Is this the right way Posted: Tue Jan 27, 2009 6:31 pm |
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[(5000000 *7.20) + (10000000*1.25)] /10000000
That should give you 4.85
Its total earnings by number of shares will give you earnings per share.
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RonPurewal
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Post subject: Re: Is this the right way Posted: Thu Jan 29, 2009 10:19 am |
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| ManhattanGMAT Staff |
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Posts: 7146
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Post GMAT Stress Syndrome wrote: [(5000000 *7.20) + (10000000*1.25)] /10000000
That should give you 4.85
Its total earnings by number of shares will give you earnings per share.
yes.
also, note that you don't have to be overly concerned with the number of 0's at the end, as the digits in the answer choices are all different. once you realize that the two terms that you're adding together will have the same number of 0's, you can just do 5x7.2 + 10x1.25 = 36 + 12.5 = 48.5. then pick the only answer choice with those digits in it.
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commit.gmat
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Post subject: Re: A corporation: GMAT Prep Posted: Thu Jul 09, 2009 4:54 pm |
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Posts: 20
Location: San Francisco
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This is how I approached it. Calculation is way easy this way. For the first nine months 5,000,000 shares --> 7.20/share since we know that at the end of the year shares are double this number, assume that we have that many shares at the end of 9 months. Then, earning per share would simply be 7.20/2 = $3.60. 10,000,000 --> $3.60 4th quarter: 10,000,000 --> $1.25 simply add $3.60+$1.25 = $4.85 Guest wrote: 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) $1.83
(B) $2.43
(C) $4.85
(D) $8.45
(E) $9.70
OA C
I started by calculating the total earning ( # shares X $/per share ).
Then, thought Total Dollar/Total Share = ans
Not so. Can some please help. I am thinking this is probably weighted average.
_________________
Exam Date: July 18 2009
Target Score: 750+
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ashish.jere
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Post subject: Re: A corporation: GMAT Prep Posted: Mon Jul 13, 2009 2:21 pm |
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Posts: 78
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shouldn't it be?
[(5000000 *7.20) + (5000000*1.25)] /10000000
was increased to 10,000,000 shares
what am i missing here? (@@)
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RonPurewal
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Post subject: Re: A corporation: GMAT Prep Posted: Tue Jul 21, 2009 5:32 pm |
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| ManhattanGMAT Staff |
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Posts: 7146
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ashish.jere wrote: shouldn't it be?
[(5000000 *7.20) + (5000000*1.25)] /10000000
was increased to 10,000,000 shares
what am i missing here? (@@) you're missing the fact that ALL of the shares - including the shares that were there for the first nine months - earned money during those last three months. your calculation implies that only the new shares earned money during those 3 months - i.e., the old shares sat stagnant. that's not true.
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RonPurewal
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Post subject: Re: A corporation: GMAT Prep Posted: Tue Jul 21, 2009 5:33 pm |
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| ManhattanGMAT Staff |
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Posts: 7146
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@ commit gmat:
nice approach.
the problem with that approach, though, is that it's severely limited: it won't work at all unless the numbers are as friendly as the numbers in this problem.
i.e., change the numbers of shares to anything that's not in such a nice ratio, and you can't do that anymore.
still, nice shortcut for cases in which the numbers are this nice.
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ashish.jere
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Post subject: Re: A corporation: GMAT Prep Posted: Fri Jul 24, 2009 1:02 pm |
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Posts: 78
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RonPurewal wrote: ashish.jere wrote: shouldn't it be?
[(5000000 *7.20) + (5000000*1.25)] /10000000
was increased to 10,000,000 shares
what am i missing here? (@@) you're missing the fact that ALL of the shares - including the shares that were there for the first nine months - earned money during those last three months. your calculation implies that only the new shares earned money during those 3 months - i.e., the old shares sat stagnant. that's not true. thanks ron.
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RonPurewal
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Post subject: Re: A corporation: GMAT Prep Posted: Fri Jul 24, 2009 6:27 pm |
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| ManhattanGMAT Staff |
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Posts: 7146
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ashish.jere wrote: RonPurewal wrote: ashish.jere wrote: shouldn't it be?
[(5000000 *7.20) + (5000000*1.25)] /10000000
was increased to 10,000,000 shares
what am i missing here? (@@) you're missing the fact that ALL of the shares - including the shares that were there for the first nine months - earned money during those last three months. your calculation implies that only the new shares earned money during those 3 months - i.e., the old shares sat stagnant. that's not true. thanks ron. you got it.
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abmovietoday
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Post subject: Re: A corporation: GMAT Prep Posted: Wed Sep 23, 2009 9:44 am |
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Does this not have to be a weighted average? 9 months for $7.20 vs 3 months for the rest?
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