ABC Ltd has 100000 shares in issue as at 1 January 2003. On April 1 2003 itissues 50000 new shares.On October 2003 it issues 10000 new shares. On July 1 2003 it underatakes a 50% scrip issue. During the year 10000 covertible 5% $100 NV prefs are issued. Each preference share canconvert into 5 equity. The prefs areissued on July 1. If net income is $5000000 what are the basic and diluted EPS respectively for the year end 31 December 2003? Enjoy

50% scrip issue?

A scrip issue (also called a capitalisation issue or a bonus issue) is the issue of new shares to existing shareholders at no charge, pro rata to their existing shareholdings. (from http://moneyterms.co.uk/scrip-issue/)

24.12 basic 21.62 diluted This is getting guessy, where are my usual MC answers?!

A) $23.83 and $21.39 B) $23.83 and $19.32 C)$23.95 and $19.32 D)$23.95 and $21.39 here we are

well hey I am gonna say D then, since that is closest to what I had and I like to blame things on rounding rather than rework them

I got: basic EPS 22.7545, and diluted EPS 21.3904

Huh, I got it. This is A:) deducted 250 instead of only 25 out of NI:))

Answer is A. Guys today I did a mock example test and all the questions were sooo tricky… I got 65% overall, well below the one I got in the previous mocks. This question is just an example. I feel depressed.

This is not a 90sec question WFT!!!

Shares for basic: 1.5*100,000*3/12+ 1.5*(100,000+50,000)*6/12+(1.5*150,000+10,000)*3/12=208,750 Basic EPS = (5,000,000-10,000*100*0.05/2)/208,750=23.83 Shares for Diluted: 1.5*100,000*3/12+ 1.5*(100,000+50,000)*3/12+(1.5*150,000+50,000)*3/12+(1.5*150,000+50,000+10,000)*3/12=233,750 Diluted EPS=5,000,000/233,750=21.39

that is pretty vicious. which mock was this from, i am doing mock 1 tonight if my brain holds that long.

tvPM Wrote: ------------------------------------------------------- > that is pretty vicious. which mock was this from, > i am doing mock 1 tonight if my brain holds that > long. Was one from 7city.

why are you dividing by 2 in the numerator for basic eps? semiannual pmt or something?

because preferred was issued at July 1, not outstanding from January 1, so there is only half of the dividends for the year in payments to preferred

map1 Wrote: ------------------------------------------------------- > Shares for basic: > > 1.5*100,000*3/12+ > 1.5*(100,000+50,000)*6/12+(1.5*150,000+10,000)*3/1 > 2=208,750 > > Basic EPS = > (5,000,000-10,000*100*0.05/2)/208,750=23.83 > > Why you multiply everything by 1.5 and divide the numerator by 2?

right on map1, that is solid.

1.5 is to account for the scrip issue, 50%+100%=150%=1.5

Thanks map. Do you think EPS questions in the exam will be like this one? I hope not

Hope not. But it helps to draw a time line and get the events on the line, so you’ll know what multiplier to get, where, and what are the weights.