DILUTED SHARES QUESTION

all, conversion, beginning, following

Analyst gathered the following data about a company
1,000,000 shares of common are outstanding at the beginning of the year
10,000 6% convertible le bonds (conversion ration is 20 to 1) were issued at par June 30 of this year
The company has 100,000 warrants outstanding all year with an exercise price of $25 per share
The average stock price for the period is $20 and the ending stock price is $30
If convertible bonds are c considered dilutive, the number of shares of common stock that the analyst should use to calculate diluted earnings per share is
a 1,000,000
b 1,016,667
c 1,100,000
d 1,266,667
Answer is C, please kindly explain why??

sgupta0827

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发表于 2013-4-14 21:13 | 只看该作者

It seems like we have:
+116,667 common shares (7/12th of the year for all convertible bonds exercised It’s June, not July…)
+100,000 common shares (if all warrants exercised)
125,000 common shares (the funds from the warrants are used to buy back common*)
Yielding +91,667…
So maybe it’s one of those “closest to…” questions? Or have I made a mistake?
*I have handwritten into my book that the notional warrant buyback happens at the “Average price”, so total notional buyback would be (25*100,000)/20.

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AndyNZ