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- Topic: Diluted EPS - Conv. P.S.
| Author | Topic: Diluted EPS - Conv. P.S. |
|---|---|
| wiwin @2014-03-16 22:46:23 |
I'm confused with the add/subtract of the Pref Dividends in this question. I would assume to subtract the pref div. from the NI but in this example it was added to the numerator. Earnings for equity in year to 31/Dec/X1: $4,000,000 Common stock of $10 each: $20,000,000 There have been an issue throughout the year $5,000,000 of 7% convertible preferred stock. The terms of conversion are that every $10 nominal value of preferred stock can be converted to 1.1 common shares. Calculate fully diluted EPS for 20X1. Answer: Basic EPS = $2.00 Diluted EPS = $1.71 -------------------------------- Should I subtract the pref dividend or add the pref dividend? -If added I would get the answer above -If subtracted it's something else, or/if (netted from -pref. div + convert. pref div), then EPS would also be different |
| cfaone @2014-03-24 08:47:43 |
Net income = earning for equity + dividend paid 4,000,000 + 350,000 = 4,350,000 Basic EPS: net income – divided paid/numbers of shares outstanding. 4,000,000/200,000 = 2 Diluted EPS = 4,350,000/ 2,550,000 =1.70588 Preferred stock = 5,000,000/10 = 500,000 Preferred stock = 1.1 common stock 500,000x 1.1 = 550,000 If it was net income in place of earning from equity then dividend would have deducted for basic EPS calculation |
| Piuu @2014-03-25 04:04:16 |
Even i am confused with these kind of problems .... I got that the dividend paid comes from the convertible preffered stock =50,00,000 * .07 = 3,50,000. |
| Sculpel @2014-04-24 02:28:07 |
Hey! Where did you got 350 k dividents paid? There were no such figures in problem's situation! |
