EPS calc

CFA Level I
#1

A little confused with the answer, how would u adjust dividend paid? Birch Ltd. had net income for the year of $101,504 and a simple capital structure consisting of the following common shares outstanding: Month outstanding #of shares Jan – Feb. 24000 March – June 29400 July – Nov 36000 Dec 35040 Assume Birch issued 20% stock dividend on August 1st, in this case EPS is rounded up closest to A. $2.72 B. $2.67 C. $2.88 D. $4.23

#2

c?

#3

I get B…

#4

24000 * 2 + 4800 * 2 = 48000 + 9600 29400 * 4 + 5880*4 = 117600 + 23520 36000 * 5 + 7200*1 = 180000 + 7200 35040 * 1 = 35040 57600 + 141120 + 187200 + 35040 = 420960 101504*12/420960 = 2.893500?? = C? - Dinesh S

#5

i get jan- feb 28800 march june 35280 july 43200 august-nov - 36000 dec 35040 average 35080 ?

#6

JF 24*2 * 1.2 = 57.6 MAMJ 29.4 * 4 * 1.2 = 141.12 July 36 * 1 * 1.2 = 43.2 ASON 43.2 * 4 = 172.8 D 35.04 * 1 = 35.04 Total = 449.76 WASO = 37.48 EPS : 101504/37480 = 2.708 A?

#7

yes dinesh i have same numbers I don’t know why they say rounding up

#8

If there is a Stock dividend on Aug 1st that would apply to all past periods. from August onwards - how do we account for the increased # of shares in past periods?

#9

cpk ASON is wrong you dont consider stock div its 36000/mo

#10

no adjustments for august -dec the numbers presented already have that included

#11

that seems reasonable. But then the rounded up part throws us off. because with 35080 it comes to 2.89… ?

#12

yes i got 2.89

#13

strike my b ans… I did mean c as well 2.89

#14

A? Webtwister, Stock dividends do not result in Dividends paid (a cash dividend would, but not a stock dividend) Also I am assuming here that the Shares outstanding for Jul-Nov and Dec account for the stock dividend and do not need to be adjusted… So Common shares outstanding = (24 * 2 * 1.2 + 29.4 * 4 * 1.2 + 36 * 6 +35.04) / 12 = 37480 EPS = 101504 / 37480 = 2.7082

#15

Looks like i am in a minority with a :slight_smile: So, what is the answer Webtwister1:?

#16

sv you have 13 months plus july is special :slight_smile:

#17

It says correct answer is B but i dont get it. The B ans assumes stock dividend payout occured at the begining of the year, instead of from jan to July. My worry is how you will apply the stock dividend from july up. And please expalin your choice of estimation.

#18

if all else is correct (Jan-July and Dec.) then… J-Nov = 36000*.2 = 8640 36000+8640 = 44640 * 5/12 = 18600 SUm = 4800+11760+18600+2920 =38080 $ = 101504/38080 = 2.67

#19

i still think the correct ans is C

#20

c does make more sense