What would be the impact on Blockbuster’s 1988 earnings per share if 5 year amortization were applied to this goodwill?

In order to calculate the impact of amortizing goodwill on Blockbuster’s 1988 earnings per share, we need to first determine the total amount of goodwill for that year. This is assumed to be known. Then we can apply a formula like Earnings Per share = [(Net Income – Goodwill Amortization)/ Average Outstanding Shares] * 100.

For example, if Blockbuster’s net income was $50 million and its average outstanding shares were 5 million then applying 5 year amortization would result in an EPS (earnings per share) of [($50M – ($5M/5))/ 5M] x 100 = 8.0% This means that by amortizing their goodwill over a period of five years, Blockbuster’s 1988 earnings per share would be reduced by 8%.

However, it’s crucial to remember that the results can be very different depending on whether the original goodwill was large or how much time is needed to finish the amortization plan. Any company who is considering going down this path should consider all possible impacts.