A Ltd was incorporated in 20x1 with share capital of 10,000,000 ordinary shares of $1 each. On 1 May 20x7, A Ltd issued 3,000,000 ordinary shares at the market price of $2.50 per share. On 1 April 20x9, A Ltd made a 1-for-1 bonus issue of ordinary shares. A Ltds profit after tax was $2,500,000 for each of the years 20x5, 20x6, 20x7, 20x8 and 20x9.

Required: (a) Compute the basic EPS for 20x5, 20x6, 20x7, 20x8, and 20x9. Present your answers in dollars and round off your answers to four decimal places. (Note: these are the basic EPS figures that are presented in the 20x5, 20x6, 20x7, 20x8, and 20x9 financial statements, respectively.)

(b) Compute the comparative prior years basic EPS figures (for each of the years 20x5, 20x6, 20x7, and 20x8) that are presented in the 20x9 financial statements. Present your answers in dollars and round off your answers to four decimal places. (Assume A Ltd voluntarily presents comparative EPS figures for four prior financial periods in its 20x9 financial statements.)

(c) Comment on A Ltds profitability over the five-year period from 20x5 to 20x9. (Note: Profitability refers to a company's ability to generate profits from its available resources.)

(d) Assume another company, B Ltd, is the same as A Ltd (i.e., incorporated in 20x1 with 10,000,000 shares of $1 each, and had $2,500,000 of profit after tax in 20x7), except it issued 3,000,000 shares at $2.50 per share on 1 September 20x7, instead of 1 May 20x7. (i) Compute B Ltds 20x7 basic EPS. Present your answer in dollars and 4 decimal places. (ii) Comment on whether A Ltd and B Ltd are equally profitable in 20x7, based on the companies basic EPS for 20x7 and the definition of profitability mentioned in part (c).

(e) Assume another company, C Ltd, is the same as A Ltd (i.e., incorporated in 20x1 with 10,000,000 ordinary shares of $1 each, issued 3,000,000 shares at $2.50 per share on 1 May 20x7, and had $2,500,000 of profit after tax in 20x9), except that its 1-for-1 bonus issue of ordinary shares was on 1 August 20x9, instead of 1 April 20x9. (i) Compute C Ltds 20x9 basic EPS. Present your answer in dollars and 4 decimal places. (ii) Comment on whether A Ltd and C Ltd are equally profitable in 20x9, based on the companies basic EPS for 20x9 and the definition of profitability mentioned in part (c).

(f) When computing the weighted average number of shares outstanding, why are the effects of (i) additional shares issued at full market price and (ii) bonus issues calculated differently?