shares= 500000 begging stock price= $40 ending price= $60 average price= $50 warrants 120000 warrant holders can buy 1 share at $45 how many shares shd be used for diluted earnings per share? a. 488,000 b. 500000 c. 508000 d. 512000
I hope its D
D. 512,000: 120,000*(50-45)/50
or, 120,000*45=5,400,000 revenue from the exercise, that can buy in the market 5,400,000/50=108,000 shares, but there are a total of 120,000 to be distributed to warant holders, so 120,000-108,000=12,000 more shares should be issued, that’s a total of 512,000
D fo shizzle
D. map1 spelled it out perfectly.
what kind of formula you guys used for this? Thanks
(Average market price-warrant price)/(Average market price) * # of warrants
Well, you migh have a conversion different than 1:1, and the average price of the stock in the market might be lower than the warrant exercise price, the formula that I use is: Additional shares = MAX (0, (average price of stock - exercise price)/average price of stock)*# of shares issued following exercise It could be 0 when the average price of stock < stock exercise price
Its called the treasury method. But used ONLY when the warrants are dilutive.