Niles Company granted 42 million of its no par common shares to executives, subj

Question

Niles Company granted 42 million of its no par common shares to executives, subject to forfeiture if employment is terminated within three years. The common shares have a market price of $14 per share on January 1, 2015, the grant date of the restricted stock award. When calculating diluted EPS at December 31, 2016, what will be the net increase in the denominator of the EPS fraction if the market price of the common shares averaged $14 per share during 2016? (Enter your answer in millions of shares (i.e., 10,000,000 should be entered as 10).)

Explanation / Answer

Stock granted to executive = 42 millions

Market Price on 01/01/2015 grant date = $14/per share

Total Compansation for award is $588,000,000 (42,000,000 shares*$14 per share). Because stock award vests over three years, it is expensed $196,000,000 each year over three years. At theend of 2016, the second year $392,000,000 has been expensed ans $196,000,000 remains unexpensed so $196,000,000 would be the assume proceeds in calculating in EPS calcualtion if the market price remains same $14. $196,000,000 will buy back 14,000,000 shares and we would add to the denominator of dilluted EPS of commmon 42,000,000 shares.

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