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Sir, I am a little confused and pardon me if you have already answered this in a previous post, but I am on page 36 and have not come across it yet….
For question 3…. where did, or should I say, how did you get to 2,400,000. It’s says that only these 600,000 free shares which are considered in the diluted EPS calculation…? Am I missing something? This is not a topic I am understanding greatly so do wish to understand as much as possible.
There’s no mention of 600,000 anywhere in the question. I understand that we only take into consideration dilution once the mid-market price exceeds the excise cost….
It has been a long day so I may not be with it!
Thank you.
Chris.
How much money will we raise from the options being taken up?
3,000,000 @ $4 = $12,000,000
How many shares would we have had to issue to raise that same amount of money if we issued them at the average mid market price?
XXXXXX @ $5 = $12,000,000
So XXXXXX = 2,400,000 shares
3,000,000 shares @ $4 is the equivalent of …..
2,400,000 @ $5 + 600,000 FREE
and it’s those 600,000 free issue shares that are the diluters
Ok now?
Has anyone ever told you that you look like Kevin Pietersen?
And also, why do we use the worse case scenario in question 4 but we select the 760 shares rather than the 740 shares…..
I am sorry Mike…. 🙁
Kevin Pietersen… I have to say you are the first Mike.. I have been mistaken for someone from Il Divo… But that’s really it.
I shall take it at as a compliment nonetheless 🙂
Hi Mike,
me again…. I omitted the Principle of EPS in my readings (I told you It has been a long day) so I now understand why we used the 760 as this was the result from the earliest possible date?
But…. I have just tried to re-do Q3 again and I am still coming stuck…. It’s probably something small that will make it work but I just don’t seem to be getting it.
Would you be able to kindly explain it in possible another way so I can get it into me fick bwain!
Thank you again Mike and I appreciate your time.
P.S – Where are you located, I notice from one of your earlier lectures you mentioned you were no longer in the UK.
Thank you and have a great day.
B.W Chris.
Hi
When calculating deps, we need to disclose the WORST position and, in the example you quote, the worst position is when 760 shares are issued. It’s got nothing to do with the earliest or latest dates – it’s because with 760 option, that will result in more equity shares in issue so earnings will be spread over a greater number of shares
Ok?
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