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I have a question regarding how to get the remaining inputs on the attached excel sheets. It is using the Treasury Stock Method to compute
I have a question regarding how to get the remaining inputs on the attached excel sheets. It is using the Treasury Stock Method to compute diluted shares for a company. Any input on my current answers would also help. Thanks!
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 = 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. ] 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) [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.] 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 + 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 $ 20 Basic shares outstanding In the money options 0 5,000,000 Page 1 of 6 Computation of fully-diluted EPS Proceeds from exercise options Shares repurchased Additional shares from options ACCT 321 Intermediate Accounting for Finance Computation of Fully-Diluted EPS, PE ratio, Market Equity Capitalization and Basic EPS Weighted-average exercise price $ 18 Net income to common shareholders $ 300,000,000 $ 20 Fully diluted shares Fully-diluted earnings per share 6 Fully-diluted price to earnings ratio = 7 Basic earnings per share = 8 Basic price to earnings ratio = 9 Equity market capitalization example Fully-diluted common x market price per share shares Page 2 of 6 1.3333333333 = ACCT 321 Intermediate Accounting for Finance Computation of Fully-Diluted EPS, PE ratio, Market Equity Capitalization and Basic EPS 10,000,000 $ 500,000 277,778 Page 3 of 6 ACCT 321 Intermediate Accounting for Finance Computation of Fully-Diluted EPS, PE ratio, Market Equity Capitalization and Basic EPS 20,000,000 $ 15 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 Basic Shares 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 Days g (stock dividends and splits are applied retroactively) Weight Ratio Weighted-Average Basic Shares OutstandingStep by Step Solution
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