A company had profit after tax of €50,000,000 for the year ended 31 December 2020. The number of shares in issue on 1 January 2020 was 12,000,000 and the company undertook a 2 for 1 stock split on 1st May and bought back 2,000,000 shares on 1st October financed by a debt issue. The company has 2 million preferred shares in issue each with 10 PAR value and a dividend of 8%. The company also has in issue convertible bonds with a total of 10,000,000 of PAR value with a coupon of 3% and each 100 of PAR convertible into 10 shares. The company also has issued stock options covering 600,000 shares with a strike price of €25. The share price at the end of the year was €35 and averaged €32 over the year. The company pays tax at 20%. Calculate EPS and diluted EPS for the company, assuming their accounting year is the same as the calendar year.
A company had profit after tax of €50,000,000 for the year ended 31 December 2020. The number of shares in issue on 1 January 2020 was 12,000,000 and the company undertook a 2 for 1 stock split on 1st May and bought back 2,000,000 shares on 1st October financed by a debt issue. The company has 2 million preferred shares in issue each with 10 PAR value and a dividend of 8%. The company also has in issue convertible bonds with a total of 10,000,000 of PAR value with a coupon of 3% and each 100 of PAR convertible into 10 shares. The company also has issued stock options covering 600,000 shares with a strike price of €25. The share price at the end of the year was €35 and averaged €32 over the year. The company pays tax at 20%. Calculate EPS and diluted EPS for the company, assuming their accounting year is the same as the calendar year.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A company had profit after tax of €50,000,000 for the year ended 31 December 2020. The number of shares in issue on 1 January 2020 was 12,000,000 and the company undertook a 2 for 1 stock split on 1st May and bought back 2,000,000 shares on 1st October financed by a debt issue. The company has 2 million
The company also has in issue convertible bonds with a total of 10,000,000 of PAR value with a coupon of 3% and each 100 of PAR convertible into 10 shares. The company also has issued stock options covering 600,000 shares with a strike price of €25. The share price at the end of the year was €35 and averaged €32 over the year. The company pays tax at 20%.
- Calculate EPS and diluted EPS for the company, assuming their accounting year is the same as the calendar year.
- With regards to the buyback of shares, explain how the buyback would be treated in the accounts and the reasons companies buy back shares.
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