help, not sure if i'm getting the right answers. I have a calculator for this question (attachment 2) but am not sure if i'm using it correctly.

Name: ____________________________________________ ACCT 321 Intermediate Accounting for Finance DILUTIVE HANDOUT ID:________________________________________ Read the following information and answer the questions below [5 points]. Two years after Venice Partners invested $1,400,000 into Invisibilia, Inc. (from our in-class preferred funding example) Invisibilia, Inc. had a successful initial public offering (IPO) on July 1, 2014. In the IPO, Invisibilia, Inc. sold 5,500,000 common shares for $220,000,000. Using some of the IPO proceeds, Invisibilia, Inc. redeemed all of Mark Maker's and Venice Partners' investments of $400,000 and $1,400,000, respectively. In connection with the IPO, Invisibilia, Inc. granted stock options with a weighted-average $30 exercise price for 300,000 common shares to Mark Maker and 700,000 common shares to Antonio Merchant of Venice Partners. Also in connection with the IPO, Kayu Rockchalk was granted stock options with a weighted-average $55 exercise price for 350,000 common shares. As of December 31, 2014, Invisibilia, Inc.'s net income was $2,500,000 and its stock price increased 25% from its IPO price per share. Answers 1 2 3 4 5 As of December 31, 2014, what was Invisibilia, Inc.'s basic earnings per share (you must use the beginning common stock balances (4,004 shares) and related retirements (4 shares) from the in-class round 2 preferred funding $1,400,000 example to compute weighted-average balance for 2014. Round result to 4 digits)? 0.4546 As of December 31, 2014, how many stock options of Invisibilia, Inc. were "out-of- themoney"? 350000 Using the treasury stock method, how many additional common shares of Invisibilia, Inc. would be issued at December 31, 2014? 400000 As of December 31, 2014, what was Invisibilia, Inc.'s fully-diluted earnings per share (round to 4 digits)? 0.7995 As of December 31, 2014 what was Invisibilia, Inc.'s equity market capitalization value (hint: don't use fully-diluted weighted-average common shares)? Page 1 of 2 Name: ____________________________________________ ACCT 321 Intermediate Accounting for Finance DILUTIVE HANDOUT ID:________________________________________ Page 2 of 2 ACCT 321 Intermediate Accounting for Finance Computation of Fully-Diluted EPS, PE ratio, Market Equity Capitalization and Basic EPS Line 1 Items Price to earnings ratio 2 Fully-diluted earnings per share = Net income (to Fully diluted (weightedcommon shareholders average) common and adjusted for "as if" shares dilutive conversions to equity) 3 Fully diluted common shares = Basic common shares + In-the-money stock + warrants outstanding options (market price > exercise price) 4 Treasury Stock Method (used for options and warrants) 5 Fully diluted shares treasury stock method example = Market price per common share Earnings per share [Measures how much investors are willing to pay today for a dollar of the company's past historical accounting earnings. Commonly used stock price measurement, but mixes the market's expectations of future cash flows with past historical accounting earnings. ] [Measures how much accounting net income or loss common shareholders earned. Commonly used accounting earnings comparison analytic. Not forward looking since it is a look-back of accounting earnings and has little power in analyzing expectation of future cash flows.] + Securities convertible into common shares Assumes all tranches of in-the-money options and warrants are exercised at their weighted-average exercise price and the company uses the proceeds to repurchase common shares outstanding. [If converted method used for convertible securities.] Given Information Market price per share $ Basic shares outstanding In the money options Weighted-average exercise price $ 40 5,500,000 10,000,000 30 Page 1 of 6 Computation of fully-diluted EPS Proceeds from exercise options Shares repurchased Additional shares from options Fully diluted shares ACCT 321 Intermediate Accounting for Finance Computation of Fully-Diluted EPS, PE ratio, Market Equity Capitalization and Basic EPS Net income to common shareholders $ 6 Fully-diluted price to earnings ratio $ 40 $ 7 Basic earnings per share $ 2,500,000 $ 8 Basic price to earnings ratio $ 40 $ 9 Equity market capitalization example 2,500,000 Fully-diluted earnings per share 0.3125 = 5,500,000 = $ 0.455 = Fully-diluted common x market price per share shares Page 2 of 6 128 0.455 87.912 8,000,000 x $ 40 = ACCT 321 Intermediate Accounting for Finance Computation of Fully-Diluted EPS, PE ratio, Market Equity Capitalization and Basic EPS $ 10,000,000 x $ 300,000,000 $ 10,000,000 5,500,000 + 30 = $ 40 = 7,500,000 = 2,500,000 = 300,000,000 7,500,000 2,500,000 8,000,000 Page 3 of 6 ACCT 321 Intermediate Accounting for Finance Computation of Fully-Diluted EPS, PE ratio, Market Equity Capitalization and Basic EPS $ $ 2,500,000 8,000,000 = $ 0.3125 320,000,000 Page 4 of 6 Schedule of common stock transactions for 2014: Date Description 12/31/2013 Beginning balance of the number of shares of outstanding common stock 3/31/2014 6/30/2014 9/30/2014 12/31/2014 12/31/2014 Company repurchased common stock from shareholders Company issued secondary public offering Debt holders convert to common stock Company issued stock dividends Total basic common shares outstanding Shares 75,000,000 (15,000,000) 25,000,000 10,000,000 5,000,000 100,000,000 Computation of weighted-average basic common shares outstanding (stock dividends and splits a Weight Outstanding from 1/1/2014 to 3/31/2014 Outstanding from 3/31/2014 to 6/30/2014 Outstanding from 6/30/2014 to 9/30/2014 Outstanding from 9/30/2014 to 12/31/2014 Weighted-Average Basic Common Shares Basic Shares 80,000,000 65,000,000 90,000,000 100,000,000 Days 90 91 92 92 365 g (stock dividends and splits are applied retroactively) Weight Ratio 24.7% 24.9% 25.2% 25.2% Weighted-Average Basic Shares Outstanding 19,726,027 16,205,479 22,684,932 25,205,479 100.0% 83,821,918