ok…now got it…thanks all
Map1, we will get dividend on additional 10000 shares as well. I was able to find one example in QBank: As of the beginning of the year HalfPass Productions, Inc., had the following complex capital structure: 3,000,000 common shares outstanding. 175,000 options with an exercise price of $22. 250,000 warrants with an exercise price of $18. During the year: On March 1, the company issued 100,000 new shares of common stock. On July 1, the board of directors declared a 15% stock dividend. On September 1, the company repurchased 125,000 shares. Net income (after-tax) for the year was $7,500,000. The company paid common dividends of $2,750,000 and preferred dividends of $1,300,000. The average market price for the common stock was $25 per share. Assume the fiscal year is January 1 through December 31. At year end, HalfPass’s basic EPS is closest to: A) $1.66. B) $1.69. C) $1.94. D) $1.77. They calculated weighted avg shares = 3,504,167
My MISTAKE! So this one would be: Jan 1 available 3mil restatement factor is 1.15, that is 3.45mil*2/12=0.575mil shares jan+feb March issued 100k shares available therefore 3.1mil, restatement factor is 1.15, that is 3.1*1.15*6/12=1.7825mil shares March through August 31 September 1st bought back 125k shares out of the available 3.1mil*1.15=3.565, no restatement factor, that is (3.565-.125)*4/12 = 1.14667mil shares sept through december total, 0.575+1.7825+1.14667 = 3,504,166.67~3,504,167 shares. Checked with the textbook.
sumo Wrote: ------------------------------------------------------- > The issue of stock dividend doesn’t result in an > inflow of economic benefits similar to a bonus > issue. Only stocks issued which results in > generation of inflow of economic benefits (for > example for cash consideration) should be > pro-rated and consequently taken into account for > further stock issue. > > Therefore it is assumed the stock dividends were > issued at the start of the year and also the EPS > for the preceding year will be adjusted.(IMO) > > Cheers > Sumo ------------------------------------------------------------------------------------------------------------- Can anyone justify why it is prorated as I thought the above was correct for stock dividends???
so 63250 was right answer??? plz tell me which one was correct??? thanks
That wasn’t even one of the possibilities, assuming you’re still talking about the original question. But I’m pretty sure map1 answered it. map1 Wrote: ------------------------------------------------------- > stock dividend is considered issued as of the > beginning of the year, so this would be > (1+5%+10%)*50,000=57,500 Since the split is assumed retroactive to the beginning of the period, you’re just increasing the original count by 15%. It’s a bit of a trick question to test if you know the retroactive business. The weighting is 1 so the technically correct answer is: ((1+5%+10%)*50,000) * (12/12) = 57,500
I’ve been thinking about the second problem:) So, a stock dividend/split should be considered as of the beginning of the year, or affecting (through the restatement factor) the shares in existence at the time the stock dividend/split occurs (because t doesn’t increase net asset value for the company, unlike a issue of stock, or a buy back of stock, or a re-sale of stock held in treasury). The shares outstanding at the beginning of the year would be affected by both the 5% and the 10% stock dividend, therefore should have a restatement factor of 1+5%+10%=1.15. The new shares issued at Jule 1st should be affected only by the second stock dividend, therefore should have a restatement factor of 1+10%=1.1. This should result in: 50,000*1.15*6/12 = 28,750 shares, Jan to June (50,000*1.15 +10,000*1.10)*6/12 = 34,250 shares, July to Dec That’s a total of 28,750+34,250=63,000. What do you think?
Sorry, I actually thought he might have been referring to what is now apparently the third question. Anyways I can’t say that I’m positive but I’d agree with you, I think that looks right.
sumit_kansal Wrote: ------------------------------------------------------- > What will happen in this case? > > 01/01/04 - 50,000 shares issued and outstanding at > the beginning of the year > 04/01/04 - 5% stock dividend > 07/01/04 - 10,000 new shares issued > 10/01/04 - 10% stock dividend > > What is the company’s weighted average number of > shares outstanding at the end of 2004? > > I would say: > > 50000 *1.05 = 52500. > 52500 + 10,000*6/12 = 57,500 > 57500 * 1.1 = 63250. > > Am i correct? This looks right to me… I am not sure. More posts plz