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    Henry Has The Following Data For The Yea

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    Queen Valle
    Henry had 360,000 ordinary shares and 10,000 preference shares outstanding in 2020. Net income was 6.7 million. Basic EPS was 20. Convertible bonds could convert to 40,000 shares and share options could convert to 10,000 additional shares, making diluted EPS 17.49.

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    Henry Has The Following Data For The Yea

    Uploaded by

    Queen Valle
    59 views3 pages
    Henry had 360,000 ordinary shares and 10,000 preference shares outstanding in 2020. Net income was 6.7 million. Basic EPS was 20. Convertible bonds could convert to 40,000 shares and share options could convert to 10,000 additional shares, making diluted EPS 17.49.

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    Henry has the following data for the yea

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    Henry had 360,000 ordinary shares and 10,000 preference shares outstanding in 2020. Net income was 6.7 million. Basic EPS was 20. Convertible bonds could convert to 40,000 shares and share options could convert to 10,000 additional shares, making diluted EPS 17.49.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    59 views3 pages

    Henry Has The Following Data For The Yea

    Uploaded by

    Queen Valle
    Henry had 360,000 ordinary shares and 10,000 preference shares outstanding in 2020. Net income was 6.7 million. Basic EPS was 20. Convertible bonds could convert to 40,000 shares and share options could convert to 10,000 additional shares, making diluted EPS 17.49.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Henry has the following data for the year:

    2020 2019
    Ordinary shares outstanding 360,000 300,000
    Nonconvertible preference shares outstanding 10,000 10,000
    10% convertible bonds payable – face amount 1,000,000 1,000,000

     On September 1, 2020, Henry sold 60,000 additional ordinary shares.


     Net income for 2020 was ₱6,700,000.
     During 2020, Henry paid dividends of ₱30 per share on the nonconvertible preference shares.
     The 10% convertible bonds are convertible into 40 ordinary shares for each ₱1,000 bond.
     Unexercised share options to purchase 30,000 ordinary shares at ₱20 per share were
    outstanding at the beginning and end 2020. The average market price of ordinary share was
    ₱30 during the current year. The market price was ₱40 at the end of 2020.
     Warrants to purchase 20,000 ordinary shares at ₱45 per share were attached to the
    preference shares at the time of issuance. The warrants were outstanding at the end of 2020.
     Income tax rate is 30%.

    Required:
    Compute for the following:
    1. Basic EPS
    2. Total number of potentially dilutive ordinary shares
    3. Diluted EPS

    1
    ) Weighted average shares
    300,000 x
    Jan. 1 300,000 12/12
    Sep. 1 20,000 60,000 x 4/12
    320,000

    6,700,000 -
    Basic EPS = 300,000 = 6,400,000 = 20.00
    320,000 320,000

    2
    ) Convertible bonds payable
    Interest
    = 1,000,000 x 10% x = 70,000
    expense 70%

    Potential (1,000,000/1,000) x
    = = 40,000
    shares 40

    Incremental 70,000
    = = 1.75 Dilutive
    EPS 40,000

    Share options
    Exercise price 20
    Dilutive
    Ave. market price 30
    *Potential shares 10,000

    Warrants
    Exercise price 45
    Antidilutive
    Ave. market price 30

    Convertible bonds 40,000


    Share options 10,000
    Potential dilutive shares 50,000

    * Option shares 30,000


    Multiply by: Total exercise price 20
    600,00
    Proceeds from assumed exercise options 0
    Divided by: Average market price during the year 30
    Assumed treasury shares 20,000

    Option shares 30,000


    Less: Assumed treasury shares 20,000
    Incremental shares 10,000

    3
    ) Net income Shares EPS
    Basic EPS 6,400,000 320,000 20.00
    Share options 10,000
    Diluted EPS 6,400,000 330,000 19.39
    Convertible bonds 70,000 40,000
    Diluted EPS 6,470,000 370,000 17.49

    120 - 20 100 2018 Weighted ave. shares


    Value of one
    = = = 20 Jan. 1 - Dec.
    right
    4+1 5 31 20,000 x 1.2 x 12/12 24,000

    1,008,000
    Basic
    FV per share (right = = 42.00
    EPS
    on) 120 24,000
    Less: Theoretical value of one
    right -20
    Theoretical ex-rights FV per share 100 2019 Weighted ave. shares
    Jan. 1 - Mar.
    31 20,000 x 1.2 x 3/12 6,000
    April 1 - Dec.
    31 (20,000 + 5,000) x 9/12 18,750
    Adjustment 120 24,750
    = = 1.2
    factor 100
    Basic 1,237,500
    = = 50.00
    EPS 24,750

    2020 Weighted ave. shares


    Jan. 1 - Dec.
    31 25,000 x 12/12 25,000

    Basic 1,750,000
    = = 70.00
    EPS 25,000

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