- This topic has 12 replies, 2 voices, and was last updated 11 years ago by
.
- Posts
I need some help. Bpp Preparation question: Fenton
The question goes like this:Fenton had 5,000,000 ordinary shares in issue on 1 January 20X1.
On 31 January 20X1, the company made a right issue of 1 for 4 at $1.75. The cum right price was $2 per a share.
On 30 June 20X1, the company made an issue at full market price of 125,000 shares.
Finally, on 30 November 20X1, the company made a 1 for 10 bonus issue.
Profit for the year was $2,900,000.
The reported ESP for the year ended 31 December 20X0 was 46.4c.Required: what was earnings per share figure for the year ended 31 December 20X1 and the restated EPS for year ended 31 December 31 December 20X0.
My question is this:
How come the bonus fraction is: 2/1.95 x 11/10? I understood everything except why the bonus fraction was multiply by 11/10….
Please help me out.
Hi, the bonus fraction is not 2/1.95 x 11/10
The bonus fraction is 11/10.
The rights fraction is 2/1.95
If you follow the OT. Course notes, you’ll find a similar example together with the “rules” to be followed when faced with bonus issues and rights issues.
The first of those “rules” is “multiply ALL prior periods this year by the bonus (rights) fraction”
Check out the OT notes and then, if you still have a problem, post again
Thanks Mike.
I’ve gone through the OT again and again, but still cannot figure out how they arrive at the bonus fraction of 11/10.
I will be glad if you can tell me how to arrive at 11/10. Every other thing is understood.How many shares did you have BEFORE the bonus issue? 10? Ok, and the company gives a one for ten bonus issue. So , now how many shares do you have? The original 10 but now you also have a bonus share so in total you now have 11 shares.
The bonus fraction is How many shares do you NOW have AFTER the bonus issue / How many shares you did have BEFORE the bonus issue
OK?
Ok, if it makes sense, what’s the bonus fraction where a company makes a 3 for 5 bonus?
One more question. Why is it that the bonus fraction 11/10 was multiplied by right fraction and time factor to arrive at weighted average of shares issued before the bonus issue?
Mike,
Since I still have you on line, could you please explain to me why he bonus fraction 11/10 was multiplied by right fraction and time factor to arrive at weighted average of shares issued before the bonus issue? With reference to the initial question.
Have you gone through the notes? The first of only two rules is “Multiply ALL prior periods this year by the rights fraction and the bonus fraction”
That’s why we multiply all prior periods this year!
- You must be logged in to reply to this topic.