Srinath (Chartered Accountant) (166 Points)
07 April 2011
Please Help me with a few Problems
Thnx in advnce!
1. Equity Shares on 1.1.2001 : 5 lac
Avg. fair value/share during 2001: 20
ESOP options given on 1.1.2001 : 1 lac shares @ 15/share
Net Profit 12 lac (No tax)
Find Diluted EPS ?
Answer Given : 1200000/525000 ?? Is this correct?
2. Calculate Basic EPS
Profit 50 lakh ( No tax)
10% Preference Shares 100 lakh
Shares at beginning 10 lakh
Bonus issued at "middle" of year : 5 lakh
Given Answer : 2.6666 how?? Correct?
Max Payne
(employed)
(2574 Points)
Replied 07 April 2011
| Originally posted by : Srinath | ||
 |
Please Help me with a few Problems Thnx in advnce! 1. Equity Shares on 1.1.2001 : 5 lac Avg. fair value/share during 2001: 20 ESOP options given on 1.1.2001 : 1 lac shares @ 15/share Net Profit 12 lac (No tax) Find Diluted EPS ? Answer Given : 1200000/525000 ?? Is this correct? 2. Calculate Basic EPS Profit 50 lakh ( No tax) 10% Preference Shares 100 lakh Shares at beginning 10 lakh Bonus issued at "middle" of year : 5 lakh Given Answer : 2.6666 how?? Correct? |
 |
Q1
EP of option = 15
MP of share = 20
No of shares acquirable with the options = 100,000 (1)
First find the bonus element in the option.
EP of 100,000 options = 15*100,000 = 15,00,000
No of shares available at this price from market = 15,00,000/20 = 75,000 (2)
Therefore bonus element in the options = (1) - (2) = 100,000 - 75,000 = 25,000 shares
Existing no of equity shares = 500,000
Add: dilutive potential equity = 25,000
Total = 525,000 shares
Dilutive effect of options on the earnings = Nil
Therefore, Diluted EPS is correct @ 12,00,000/5,25,000
Q2
Whether bonus issued at the end or beginning or middle of the year, the period shall be reckoned from beginning of the year itself, because bonus is only capilisation of the existing ascertained profits of previous year(s)..
Hence Total no of shares = 15,00,000
PAT = 50,00,000
(-) Preference Dvd 10,00,000
Earngs to eqty shrhldrs 40,00,000
No of equity shares 15,00,000
EPS (Basic) 2.67
If previous years Profits/EPS given you have to restate that years EPS taking 15,00,000 shares as the base for that year also. Same to be done for shares split or consolidation of shares also. (AS 20 rqmt)
CAclubindia
