studyn

Hi answer is correct.

Actually u miss out to multiply the 5 million shares by 12 mths.

In fact it work out like this. Since on Jan 1 there are 5 million outstanding, normally we will use no of share * no of months which result in 5million * 12 = 60 million

Next 60 million * (3/2) = 90 million. Now we need to divided the shares by 12 mths to get the ans: 90 million / 12 = 7,500,000

I'm using another example from schweser notes eg:

Jan 1 :10,000shares
Apr 1 :4000 share issue

1) 10000 * 12 outstanding mths = 120,000
2) 4000 * 9 outstanding mths = 36,000
3) total weighted average will be (120000+36000)/12 = 13 000 shares

in a nutshell for this qns, since u never multiply by 12 outstanding mths in first place, u can skip to divide the no of shares by 12 after multiply by 1.5 time split.

I recommend to attempt this type of qns, remember to multiply the number of outstanding mths to the number of shares first before divided by 12 to avoid any mis calculations.

cheers



Edited 1 time(s). Last edit at Saturday, October 16, 2010 at 02:20PM by vitalstrike82.