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hello
could you explain how to calculate this question
thank you
“the profit after tax for Dunstan for the year ended 30 September 20×7 was 12 million, on 1 October 20×6 Dunstan had 34 million shares in issue, on 1 February 20×7 Dunstan made a market issue of 3 million shares at full price, on 1 July 20×7 Dunstan made a bonus issue of one new share for every five shares held”
what is the basic earning per share for Dunstan for the year ended 30 September 20×7″
Hi,
I think it is better for your learning if you attempt to answer it and explain the bits where you do not understand the answer so that I can then help you. Start by drawing up a table to calculate the weighted average number of shares in issue as done in the lectures.
Once you’ve done that then I’m more than happy to help address your difficulties, but I’m reluctant to just answer a full question without you having attempted it in some capacity.
Thanks
hello
in the lecture, the bonus issue doesn’t need to weighted average, only use the total number of shares after bonus shares issued, so why in this question can’t use this number of shares to calculate eps
number of shares
(34m*4/9+37m*5/9)+(34m*4/9+37m*5/9)/5Hi,
I’m not too sure that I follow your calculation above. You need to lay out the weighted average calculation using the table we’ve done in the lectures. The key is that the bonus issue of shares is treated as having been in existence from the start of the year, i.e. has always been in existence. So following the issue of 3m shares, we have 37m at the date of the bonus issue and so an additional 7.4m will be issued (37m/5).
We can then add this to the 34m at the start of the year and the 37m following the market price issue, and the weight the numbers based on the number of months (4 months and 8 months). I think you should then get a total of 43.4m as the weighted average.
Thanks
HI Chris
I was also solving the same question from Kaplan exam kit and I have also watched your lecture and seen how to treat the bonus shares.
The answer for weighted average number of shares which I got was 43.4m however the exam kit has 43.2 as the answer.
To see if i can get any help, I found this post and observed that even you have got 43.4m as your answer.The working from the kit is as below:
1 Oct 34m x (4/12) x (6/5) = 13.6m
1 Feb 37m x (5/12) x (6/5) = 18.5m
1 July 44.4m x (3/12)= 11.1
Total is 43.2mI have no clue why 6/5 is being shown in the workings.
There is also a note in the answer saying the bonus fraction should be applied from the start of the year up to the date of the bonus issue.
The answer for EPS for the year ended 30Sep 20X7 is
($12m/43.2m x 100) = 28c.Even based on our working answer of 43.4m, the final answer is also 28c.
I’m just curious to know why the working answers are different and also why 6/5 was used in the workings.
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