diluted EPS

Your post asks for EPS. The answer to your question is therefore $1,550,000 / 2,500,000 = EPS of $0.62

If your question had been calculate DEPS the answer to that would be $0.42

What does the answer say?

Let me ask you another question before I go further! You have written in your original post “on 1 October 2013, hoy had 2.5 million equity shares of 50 cents each.”

Now, is that exactly what the question says or does it say $2.5 million equity shares of 50 cents each?

The difference is the $ sign

Now I’m confused! Are you really sure that it says 2.5 million without the $ sign?

That makes a HUGE difference!

With $2.5 million 50 cent equity shares in issue, that means that there are 5 million shares of 50 cents each giving us the $ value of $2.5 million

With reference to the options, 2 million options, when taken up, will bring into the company $2.4 million

If the company had wished to raise $2.4 million during the year, they could have issued 800,000 shares at mid-market price of $3

That means that 2,000,000 @ $1.20 is the equivalent of 800,000 @ $3 + 1,200,000 free

And it’s those free shares that create the dilution because shares issued at full market price in theory have no affect on the earning capacity of the shares already in issue

So, taking account of the new 1,200,000 free shares, there are now the original 5 million plus these option shares = a total of 6,200,000 as the denominator for the DEPS calculation

$1,550,000 earnings divided by 6,200,000 shares = 25 cents per share DEPS

OK?

And PLEASE be careful and make sure that you give full, correct information next time 🙂

The $2.4 million is being used to illustrate the point and has been chosen randomly. There is no working.