EPS - earnings per share
DEPS - Diluted earnings per share.
To get this we need shares outstanding (given) and diluted shares outstanding is the sum of shares outstanding and potential shares outstanding, which we'll go through in more detail at the end. So, step by step (with reasoning):
So, net income after taxes is $28,000,000. Easily enough, we just divide this by shares outstanding. Here we go:
1. 6m shares out in 2008.
2. 1m issued on 7/1/09
3. .5m on 10/1/09.
We use weighted-average shares outstanding in EPS.
so, (in millions)
6+1*((12-7)/12) + .5*((12-10)/12) = weighted shares.
the stuff in the parenthesis are the weightings.
6+.41666+.08333333= 6.5m (rounded)
28m/6.5m = $4.3077 earnings per share
For Diluted we add in convertable shares. 25,000 bonds converts to 20 shares each giving us 500,000 additional shares as of 4/1/09.
12-4=8/12 = .6666* 500,000 = 333,333 average share + 6.5m = 6.833m shares
28m/6.833m = $4.09776 diluted earnings per share
So in summary:
EPS: $4.3077
DEPS: $4.09776
Hopefully this helps!
Patrick
Zenn Incorp, has 6000000 shares of common stock outstanding on 12/31/08. An additional 1000000 shares of common stock were issued on 7/1/09 and 500000 more on 10/1/09. On 4/1/09, Zenn issued 25000 $1000 face value, 8% convertible bonds. Each bond is convertible into 20 shares of common stock. No bonds were converted into common stock in 2009. Net income after taxes is $28000000 and the tax rate is 30%. Compute EPS and DEPS.
I actually don't get this question. Can someone help, explaining step by step how i can get the answer?
