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How to calculate diluted weighted average shares when there is convertible loan issue and rights issue?
Have you watched the videos and read the class notes on this topic? There are explanations and examples that I recommend you look at and then come back to me if you are unsure of anything.
Thanks
Actually this question is from pre September mock section B
And so there is no explanation of the answer.
The scenario is there is 100 million shares in issue .on 1st Jan there is 6% convertible loan notes $20m (20 shares for each $100). Then on 1st oct 1 for 4 rights issue.
Market price – $8.2 , rights issue at $7.5
Therefore TERP-8.06
Bonus fraction-1.017So,
Will loan notes option will also have rights issue impact??
104*9/12*1.017=79
104+26 *3/12=32.5
Total-111.5Is this correct?
Hi,
The loan notes only have an impact on the diluted EPS figure. As no shares have yet been issued to make it impact the EPS figure.
So, you would calculate the EPS figure as normal and then once you have that figure you would then look at the future post-tax interest saved when the loan notes are issued and the maximum number of shares issued when the loan notes are converted to shares to get the diluted EPS figure.
Thanks
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