An analyst gathered the following information about a company: 01/01/06 - 20,000 shares issued and outstanding 04/01/06 - 5.0% stock dividend 07/01/06 - 5,000 shares repurchased 10/01/06 - 2:1 stock split What is the company’s weighted average number of shares outstanding at the end of 2006? A) 39,500. B) 45,000. C) 37,000. D) 47,000.
I got D.
C 37000.
C 37,000 20,000*12 = 252000 *1.05 (for 5% stock dividend) -5000*6 = -30000 = 222,000/12 =18,500 *2 (for stock split) =37,000 Hope I am right.
Stock divends are calculated based on entire year 1/1 = [20,000 + 5%*20,000] * 2 * 12/12 = 42,000 7/1 = - 5,000 * 2 = - 10,000 * 6/12 = -5,000 Answer C
D) 47,000. 20,000 * 12 * 1.05 *2 = 504,000 5,000 * 6 * 2 = 60,000 (504000 + 60000)/12 = 47000
sorry… should have subtracted Treasury Stock. …go with C (37,000). I always make the same mistake…
I got C) 37000 as well. Sabaruch you have to subtract out the shares being repurchased
Your answer: C was correct! The end-of-period weighted average number of common shares outstanding is the number of shares outstanding during the year weighted by the portion of the year they were outstanding. Dividends and splits are applied to all shares issued or repurchased and all original or adjusted shares outstanding prior to the split or dividend. Step 1) Apply the 04/01/06 dividend to the beginning of year shares: Adjusted shares = 1.05 × 20,000 = 21,000 Step 2) Apply the 10/01/06 split to the adjusted beginning-of-year shares and the repurchase. Adjusted beginning-of-year shares = 42,000 (= 2 × 21,000) Adjusted repurchase = 10,000 (= 2 × 5,000) Step 3) Compute the weighted average number of shares. 42,000(12/12) - 10,000(6/12) = 37,000 shares.
here the share repurchase is not adjusted for stock splits …why so?
Oops i meant the share repurchase is not adjusted for stock dividend …why so?
jp25 Wrote: ------------------------------------------------------- > Oops i meant the share repurchase is not adjusted > for stock dividend …why so? The share repurchase is AFTER the dividend.