Respuesta :
Answer:
The diluted EPS is $1.65
Explanation:
Solution
The Numerator (Basic EPS):
The Net income = $1,050 million
The Preferred dividends= 3mn * 9% * $ 100 = $ 27 million
because the preferred stock is cumulative, the dividend is deducted whether or not paid)
The Denominator (Basic EPS): Weighted average Number of shares
Now,
common stock outstanding (1/1 – 12/31) 600 million x (12/12) *1.05 = 630 million
The Treasury shares purchased (3/1 – 12/31) (24) million x (10/12) *1.05 =(21) million
The shares treasury sold (10/1 – 12/31) (4) million x (3/12) =1
The average weighted number of shares =610 million
so,
Basic EPS = ($1,050-27) ÷ 610 = $1.68
Stock Options
The stock choice are dilutive because exercise price is lesser than market price of $ 70 per share.
By applying the treasury stock method.
Exercise is supposed to take place at the later of the date of issue (9/13/21) or the beginning of the year (1/1/21). Assume exercise 1/1/21
The Treasury Stock Method suggests that the proceeds received upon exercise of $1,680 (30 million x $56) are used to purchase back stock at the market price average, for example $1,680 ÷ $70 = 24 million
The net goes higher in the number of shares = 6 million (30 million issued upon exercise – 24 million repurchased)
Convertible Bonds
By applying method if bonds are transformed into common stock. however,a step by step approach to calculate nature of dilution. is determined
Now,
The shares issued on conversion = 6 million
The Interest paid, net of tax = $3 [(8% x $50) x 75%]
The Interest per shares issued = 3/6 = $ 0.5 per share
The EPS without assumed conversion = ($1,050 - $27+3) ÷ (610 + 6+6) = $1.65
The convertible bonds are dilutive because $1.65 is less than $1.68
Therefore, diluted EPS = ($1,050 - $27+3) ÷ (610 + 6+6) = $1.65
When the Berclair's basic and diluted earnings per share for the year ended December 31, 2021, Then, The diluted EPS is = $1.65
Computation of Tax Rate
The Numerator (Basic EPS):
Then, The Net income is = $1,050 million
After that, The Preferred dividends is = 3mn * 9% * $ 100 = $ 27 million
because When the preferred stock is cumulative, Then, the dividend is deducted whether or not paid)
When The Denominator (Basic EPS): Weighted average Number of shares
Now, When the common stock outstanding (1/1 – 12/31) 600 million x (12/12) *1.05 is = 630 million
When The Treasury shares purchased (3/1 – 12/31) (24) million x (10/12) *1.05 is = (21) million
Although, The shares treasury sold (10/1 – 12/31) (4) million x (3/12) =1
When The average weighted number of shares is = 610 million
so,
The Basic EPS is = ($1,050-27) ÷ 610 = $1.68
Then the Stock Options are:
When The stock choice is dilutive because the exercise price is lesser than the market price of $ 70 per share.
Now, By applying the treasury stock method.
The Exercise is supposed to take place at the later date of issue (9/13/21) or the beginning of the year (1/1/21). Then, Assume exercise 1/1/21
After that, The Treasury Stock Method suggests that the proceeds received upon exercise of $1,680 (30 million x $56) are used to purchase back stock at the market price average, for example, $1,680 ÷ $70 is = 24 million
When The net goes higher the number of shares is = 6 million (30 million issued upon exercise – 24 million repurchased)
Now, Convertible Bonds
Then, By applying the method if bonds are transformed into common stock. however, When a step by step approach to calculating the nature of dilution. is determined
Now,
The shares issued on conversion is = 6 million
The Interest paid, net of tax is = $3 [(8% x $50) x 75%]
The Interest per shares issued is = 3/6 = $ 0.5 per share
The EPS without assumed conversion is = ($1,050 - $27+3) ÷ (610 + 6+6) = $1.65
After that, The convertible bonds are dilutive because $1.65 is less than $1.68
Thus, diluted EPS = ($1,050 - $27+3) ÷ (610 + 6+6) = $1.65
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