jauciu 12

San, there is a very similar exercise within the course notes and I believe that I have worked through that example in video recording. Have you checked that?

I addition, you’re asking me to sit here typing with two fingers a complete answer to half a question. Instead, please do me a favour and identify exactly which part of the calculation it is that you do not understand

Many thanks

It’s $600,000 total to be received from the option divided by $4 average mid-market price through the year to give us the equivalent number of shares to be issued at full market price in order to raise the $600,000 that would be raised by the options being exercised

And all of this is explained in the appropriate video 🙁

Ok, but does the above explanation cover it for you?

The potential global investor of the future wants to know what the WORST position could be in the future when all these diluting conversions have taken place.

So far as the loan conversion is concerned, the WORST position is the one that results in the greatest number of equity shares being issued on the conversion – why? Because that will result in more shares in issue amongst whom the profits will be divided.

Think of a box of chocolates (60 chocolates in e box) divided amongst you and your two sisters. That’s 20 chocolates each. But then along comes an additional member of the family and your new baby brother wants a share too of the box of chocolates so that means there’s only 15 each.

A cousin arrives and wants a share – you’re now down to 12 each

Until his brother arrives and also wants to join in – now you’ve only got 10 each

The more shares there are, the lower the earnings per share

Now, go and have a chocolate before any more relatives arrive