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Hi Sir
please i need help with this
the issued share capital of savoir, a publicly listed company, at 31 march 20×5 was $10 million. Its share are denominated at 25 cent. Sir what is the number of shares of this company? 10 000/.25, i got 40 000 but the answer says 84 000 shares I dont understand why. its Dec 2009.Josy, you haven’t told me about the issue at full price, the bonus issue nor the rights issue!
How can I answer your question if you don’t even give me half the relevant information?
Type out the full question for me – it’s no longer shown on the ACCA website so I have no access to it – and I’ll answer it for you (Please be careful when you type it out – dates are important)
the issued share capital of savoir, a publicly listed company, at 31 march 20×5 was $10 million. Its share are denominated at 25 cent each.
on 1 April 20×5 savoir issued $20 million 8% convertible loan at par. The terms of conversion (on 1 April 20×8) are that every $100 of loan stock, 50 ordinary shares will be issued at the option of the stockholders.
Alternatively the loan stock will be redeemed at par for cash. Also on 1April 20×5 the director of savoir were awarded share options on 12 million shares exercisable from 1April 20×8 at $1.5 per share. the average market value of savoir’s shares for the year ended 31 march 20×6 was $2.5 each. The income tax rate is 25%. profit for 31 March 20×6 is 25 200 000.
calcul the basic and diluted eps. Sir i just want the basic eps, in fact just the the number of share for $10 million share capital.
Basic eps is 25,200,000 / 40,000,000 = 63 cents
Diluted eps is 26,200,000 / 84,800,000 = >31.13 cents
The number of shares in the diluted eps calculation is 84,800,000. If the answer has written 84,000,000 then it’s a misprint!
Ok?
Sir bpp kit
basic eps 25 200 / 84 000diluted eps
existing shares 84 000
loan stock 10 000
shares option 4800total shares —————-
98 800 sharesmy answer
basic eps 25200 / 40 0000existing shares 40 000
loan stock 10 000
shares option 4800total shares —————-
54 800 sharesSir I dont understand bpp basic eps, but sir how you manage to get 84 800 of shares for diluted eps. and why bpp got 84 000 shares for basic eps instead of 40 000 shares?
Sir bpp kit
basic eps 25 200 / 84 000diluted eps
existing shares 84 000
loan stock 10 000
shares option 4800total shares —————-
98 800 sharesmy answer
basic eps 25200 / 40 0000existing shares 40 000
loan stock 10 000
shares option 4800total shares —————-
54 800 sharesSir I dont understand bpp basic eps, but sir how you manage to get 84 800 of shares for diluted eps. and why bpp got 84 000 shares for basic eps instead of 40 000 shares?
Your $10,000 loan stock’s worth of shares needs to be converted into 25 cent equity shares = 40,000 new equity shares
I agree your 4,800 option shares
I too cannot understand the BPP answer and suggest that there is at least one misprint in their answer
Check out my answer when you are happy about the 40,000 shares on conversion of the loan and the work out your own answer
And don’t believe everything that you read in books!
thanks sir, please but how you got 84 800? I got 54 800 ( 40 000+ 10000+ 4800)
You’re right! I’ve misread the question!
On the conversion of the loan, 10,000,000 equity shares will be issued – I have treated it as $10 million worth of equity shares = 40,000,000 shares 🙁
My mistake (and BPP’s!)
DEPS should be $25,600,000 / 54,800,000 = 48.9 cents per share
Better?
It’s a bit of a silly question really! The idea of cashing in $100 of 8% loan stock in exchange for equity shares with a nominal value of $12.50 is difficult to imagine!
Yes, I know that the equity shares with a 25 cent nominal value will clearly have a market value rather greater than that 25 cent face value but, even so, I feel that it’s an unrealistic question!
Hi there, shouldn’t the DEPS be 48.18c?
($25.2mil + $20mil*8%*75%) / [50mil+12mil*($2.5-$1.5)/$2.5]And as for the Basic EPS , it is 63c.
$25.2mil/($10mil/0.25)
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