s plant to a wholly owned foreign subsidiary and is novw JItau OI Making it them

Question

s plant to a wholly owned foreign subsidiary and is novw JItau OI Making it themselves ouying the finished product from the subsidiary c. Zeta discontinued a profitable segment because it became cheaper to buy the finished product from overseas manufacturers d. all would need a separate EPS computation 36. Compute basic and diluted earnings per share for Alpha for 201 In 2016 Alpha had 100,000 shares common and 50,000 4%$100 par cumulative preferred non- Income for 2017 was 275,000 - convertible shares outstanding. On January 2,2017 Alpha sold 25,000 common shares it been holding as treasury stock. Income for 2016 was $200,000. I Compute EPS in each of the following alternative situations. Note each is independent, do not combine results. A. Alpha had 10,000 warrants to buy common stock at 30 per share. Common was in 2017 B. Alpha has 1,000 3.5% convertible bonds outstanding. Each bond has a face of $100 and can be converted to 2 shares of common at any time. Tax rate is 40% (inzign- s C. On June 30, 2017 Alpha buys 5,000 shares of treasury stock. trading at 35 3SOO

Explanation / Answer

Since the per share profit from share issue on conversion of convertible bonds (1.05) > Basic EPS of 0.58, the convertible bonds are anti-dilutive and will not be considered in calculation of Dilutive EPS.

Thus, in this case, Dilutive EPS = Basic EPS = $0.58

A: Basic EPS Net Income attributable to Common shares Number of common shares outstanding Basic EPS Formula Amount Formula Amount Formula Amount =275000-(0.04*50000*100) 75,000 =100000+25000 125000 =75000/125000           0.60 A: Diluted EPS. Since EP<MP, warrants are dilutive Net Income attributable to Common shares Number of common shares outstanding Basic EPS Formula Amount Formula Amount Formula Amount =275000-(0.04*50000*100) 75,000 =100000+25000+(10000-(10000*30/35))                    126,429 =75000/126429           0.59

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