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标题: Diluted EPS [打印本页]

作者: YouCanDoIt 时间: 2011-7-13 16:29 标题: Diluted EPS

Hello fellow AF'ers 44 days left. Time to buckle down.

Please help with this qbank question.

The following data pertains to the sapphire company:
Net income is $15000
5000 shares of common stock issued on Jan 1st
10% stock dividend issued June 1st
1000 shares of common stock were repurchased july 1st
1000 shares of 10%, 100 par preferred stock each convertible into 8 shares of common were outstanding the whole year

What is the companys diluted earnings per share? the answer is $1

Please discuss in detail.

作者: smartpants 时间: 2011-7-13 16:29

1/1 5000
6/1 10% stock dividend *1.1 = 5500 * 12/12 = 5500
7/1 1000 repurchased -> -1000 * 6/12 = -500
total # of shares = 5000

without dilution effect: EPS = (15000 - 1000 * 100 * .1 )/5000 = 5000/5000 = 1$

with dilution: say all preferred is converted.
Numerator = 15000
denominator = 5000 + 1000*8 = 13000

EPS = 15/13 > 1$ (anti-dilutionary).

so 1$=Diluted EPS.

CP

作者: Micholien 时间: 2011-7-13 16:29

that is the definition...always from beginning of period.

CP

作者: Beatnik 时间: 2011-7-13 16:29

finspert Wrote:
-------------------------------------------------------
> Thanks!

and splits too braaah.

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