Example 14 FSA: Weighted Avg. Shares Calc Share outs. Jan 1, 2006 = 1,000,000 Shares issued April 1, 2006 = 200,000 Shares repurchased Oct 1, 2006 = -100,000 Weighted Avg # of Shares 2006, CFA Curriculum Answer: 1,000,000(3/12)+1,200,000(6/12)+1,100,000(3/12)=1,125,000 Shoudn’t it be… 1,000,000(12/12)+1,200,000(8/12)+1,100,000(3/12)=1,525,000 If no, why not?
This is my calc: (1,000,000(12) + 200,000(9) - 100,000(3))/12 = 1,125,000 CFA calc looks ok too. They are using (3/12), (6/12), (3/12). Add all these together and you get 12/12 = 1 year. So for 3 months, 1,000,000 shares outstanding. then 200,000 are added and now you have 1,200,000 for 6 more months in the year. then 100,000 repurchased and a final 1,100,000 oustanding for 3/12 of the year. hope this makes sense…
Only 3 months you have outstanding 1,000,000 shares (01/01/06 to 03/31/06) Only 6 months you have outstanding 1,200,000 shares (04/01/06 to 09/30/06) Only 3 months you have outstanding 1,100,000 shares (10/01/06 to 12/31/06) If you want to do it your way, you have: 1,000,000 outstanding 12 months, plus 200,000 outstanding 6 months (you have already accounted for the 1,000,000) 100,000 outstanding for 3 months (you have already accounted for the 1,000,000)
Or using Gouman method: instead of: 1,000,000(12/12)+1,200,000(8/12)+1,100,000(3/12)=1,525,000 It is this: 1,000,000(12/12)+ 200,000(6/12)+ 100,000(3/12)=1,125,000
Got it. Thanks fellas.
Gouman Wrote: ------------------------------------------------------- > Example 14 FSA: Weighted Avg. Shares Calc > > Share outs. Jan 1, 2006 = 1,000,000 > > Shares issued April 1, 2006 = 200,000 > > Shares repurchased Oct 1, 2006 = -100,000 > > Weighted Avg # of Shares 2006, CFA Curriculum > Answer: > > 1,000,000(3/12)+1,200,000(6/12)+1,100,000(3/12)=1, > 125,000 > > Shoudn’t it be… > > 1,000,000(12/12)+1,200,000(8/12)+1,100,000(3/12)=1 > ,525,000 > > If no, why not? 3months for 1,000,000 End of Jan to Beg of Apr. 6 months for 1,200,000 Beg. of Apr. to Beg of Oct. 3monts for 1,100,000 Beg of Oct to Dec.