The following information is relevant: 1. On 31 March 2010 Harcourt plc made a 1 for 5 rights issue at £2.35 per share. The market value of a share on that date was £3.25. 2. The 12% convertible bonds are convertible as follows: a. If the conversion is exercised on 1 January 2011 each £100 of bonds is convertible into 70 ordinary shares. b. If the conversion is exercised on 1 January 2012 each £100 of bonds is convertible into 60 ordinary shares. 3. Harcourt’s basic EPS for 2009 is 12p. Required: a) Calculate the basic and diluted EPS for Harcourt plc for 2010 and restate the basic EPS for 2009. b) Discuss why there is a need to disclose diluted earnings per share.
The following information is relevant: 1. On 31 March 2010 Harcourt plc made a 1 for 5 rights issue at £2.35 per share. The market value of a share on that date was £3.25. 2. The 12% convertible bonds are convertible as follows: a. If the conversion is exercised on 1 January 2011 each £100 of bonds is convertible into 70 ordinary shares. b. If the conversion is exercised on 1 January 2012 each £100 of bonds is convertible into 60 ordinary shares. 3. Harcourt’s basic EPS for 2009 is 12p. Required: a) Calculate the basic and diluted EPS for Harcourt plc for 2010 and restate the basic EPS for 2009. b) Discuss why there is a need to disclose diluted earnings per share.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The following information is relevant:
1. On 31 March 2010 Harcourt plc made a 1 for 5 rights issue at £2.35 per share. The market value of a share on that date was £3.25.
2. The 12% convertible bonds are convertible as follows:
a. If the conversion is exercised on 1 January 2011 each £100 of bonds is convertible into 70 ordinary shares.
b. If the conversion is exercised on 1 January 2012 each £100 of bonds is convertible into 60 ordinary shares.
3. Harcourt’s basic EPS for 2009 is 12p.
Required:
a) Calculate the basic and diluted EPS for Harcourt plc for 2010 and restate the basic EPS for 2009.
b) Discuss why there is a need to disclose diluted earnings per share.
Transcribed Image Text:Harcourt plc had the following capital structure as at 1 January 2010:
4,000,000 ordinary shares of 50p each
10% £1 preference shares
12% convertible bonds
The following information has been extracted from the income statement:
Profit before interest and tax
Less interest
£
2,000,000
200,000
500,000
Less tax at 40%
Profit attributable to shareholders
£
1,250,000
60,000
1,190,000
476,000
714,000
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