Q1. Financial statement and share information of Company A for 20x6 are as follows: Net profit after tax Less preference dividends No. of issued ordinary shares at 31 December 12,000,000 24,000 4,250,000 Information on movements in ordinary shares: 1 Jan 20x4 New issue for cash (incorporation) 1 April 20x5 New issue for cash 1,000,000 200,000 1 July 20x5 Bonus issue: 1 for 1 1,200,000 1 Oct 20x5 1 July 20x6 From conversion of preference shares Rights issue: 1 for 2 500,000 1,450,000 1 new share for every 2 existing shares Exercise price: $2, Market price: $3 All rights were taken up -100,000 1 Oct 20x6 Shares re-purchased at fair value Information on Potential Ordinary Shares (dilutive instruments) 1. On 1 July 20x4, the company issued 1,000,000 6% non-cumulative preference shares, par value $1, that are convertible to 500,000 ordinary shares. The original conversion ratio is 2 preference shares to 1 ordinary share. After the bonus issue, each reference share was convertible to 1 ordinary share. (Ignore the effects of the rights issue on the conversion ratio). On 1 Oct 20x5, 500,000 preference shares were converted to ordinary shares. Preference dividends were declared on outstanding balance of preference shares as at 30 June of each year. 2. On 1 July 20x5, the company issued 500,000 units of stock options. Each stock option unit entitles the holder to purchase 1 unit of ordinary share. Exercise price Average market price (20x6) $2.50 $3.00 None were exercised during the period because of a vesting period requirement. 3. On 1 Oct 20x5, the company issued $10,000,000 convertible bonds at par value, which are convertible to 10,000,000 ordinary shares. Market interest rate: Tax rate: 5% per annum 20%. None were converted during 20x5 or 20x6 Required: Calculate weighted average number of ordinary shares outstanding (using a table), Basic EPS, Per share effect of each security, ranking, and then diluted EPS for 20x6.