At January 1, 2018, Canaday Corporation had outstanding the following securities: 760 million common shares 30...
At January 1, 2018, Canaday Corporation had outstanding the
following securities:
760 million common shares
30 million 6% cumulative preferred shares, $50 par
7% convertible bonds, $3,000 million face amount, convertible into
90 million common shares
The following additional information is available:
On September 1, 2018, Canaday sold 81 million additional shares of common stock.
Incentive stock options to purchase 50 million shares of common stock after July 1, 2017, at $10 per share were outstanding at the beginning and end of 2018. The average market price of Canaday’s common stock was $20 per share during 2018.
Canaday's net income for the year ended December 31, 2018, was $1,540 million. The effective income tax rate was 40%.
Required:
1. & 2. Calculate basic and the diluted
earnings per common share for the year ended December 31, 2018.
(Enter your answers in millions (i.e., 10,000,000 should be
entered as 10).)
Numerator/ Denominator = earnings per share
Diluted earnings = $1576 / ? = ?
Homework Answers
Ans:
|
Numerator |
/ |
Denominator |
= |
Earnings per share |
||
|
Basic |
$ 1,450 |
/ |
787 |
= |
$ 1.84 |
|
|
Diluted |
$ 1,576 |
/ |
902 |
= |
$ 1.75 |
|
|
Basic EPS=Net Income available to equity shareholders/Weighted average number of outstanding shares |
||||||
|
Diluted EPS= |
Adjusted Net Income available to equity shareholders/Adjusted Weighted average number of outstanding shares |
|
Net Income |
$ 1,540 |
|||||
|
Less:Preferred dividend (30 million * $50 *6%) |
$ 90 |
|||||
|
Net Income available to equity shareholders |
$ 1,450 |
|||||
|
Weighted average number of outstanding shares= |
760 million + (81 million * 4/12)= |
787 millions |
||||
|
Net Income |
$ 1,540 |
|
Less:Preferred dividend (30 million * $50 * 6%) |
$ 90 |
|
Add:Interest saved net off ta* (3000 million * 7% * (1-0.40) |
$ 126 |
|
Net Income available to equity shareholders= |
$ 1,576 |
|
Adjusted Weighted average number of outstanding shares= |
787 million + [50 million - (50 million * $10 / $20)] + 90 million=902 Millions |
Diluted EPS= $1576 million / 902 million shares = $ 1.75
Hope this helped ! Let me know in case of any queries.
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