Exam (elaborations)
MAC3703 ASSIGNMENT 2 OF 2022 SEMESTER 1
- Course
- Institution
Detailed assignment guaranteed distinction.
[Show more]
6 reviews
By: ivymtshal • 2 year ago
By: lvanwyk65 • 2 year ago
By: sepobereneilwe • 2 year ago
By: mamellomkb • 2 year ago
By: bridgettsibanda • 2 year ago
By: nontokozondlovu88 • 2 year ago
Seller
Follow
UNISOLUTIONS
Reviews received
Content preview
MAC3703 ASSIGNMENT 2 – SEMESTER 1 OF2022
QUESTION 1
(a) Basic earnings per share
R
Profit before tax 10 000
Less Taxation (10 000 * 28%) (2 800)
Earnings 7 200
Shares Adjustment Fraction of Weighted
Outstanding Factor the year Average
Shares
Shares in issue (1 January 2020 to 29 50 000 1.010526 8 421
February 2020)
Rights exercised on 1 March 2020 10 000
1 March 2020 to 30 April 2020 60 000 10 000
Fresh issue to purchase a new factory building
On 1 May 2020 10 000
1 May 2020 – 31 December 2020 70 000 46 667
65 088
Basic earnings per share = 𝐵𝑎𝑠i𝑐 𝐸𝑎𝑟𝑛i𝑛𝑔𝑠
W𝑒i𝑔ℎ𝑡𝑒𝑑 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠
7 200
=
65 088
= 𝑅0. 1106 𝑜𝑟 11. 06𝑐 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒
Rights issue
Theoretical ex rights value per share
=
𝐹𝑉 𝑜𝑓 𝑎𝑙𝑙 𝑡ℎ𝑒 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑i𝑛𝑔 𝑠ℎ𝑎𝑟𝑒𝑠 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡ℎ𝑒 𝑒𝗑𝑒𝑟𝑐i𝑠i𝑛𝑔 𝑜𝑓 𝑡ℎ𝑒 𝑟i𝑔ℎ𝑡+𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑐𝑒i𝑣𝑒𝑑 𝑓𝑟𝑜𝑚 𝑒𝗑𝑒𝑟𝑐i𝑠𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑟i𝑔ℎ𝑡𝑠
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑i𝑛𝑔 𝑏𝑒𝑓𝑜𝑟𝑒 𝑒𝗑𝑒𝑟𝑐i𝑠𝑒+𝑁𝑢𝑚𝑏𝑒𝑟 i𝑠𝑠𝑢𝑒𝑑 i𝑛 𝑡ℎ𝑒 𝑒𝗑𝑒𝑟𝑐i𝑠𝑒
[(50 000* 4)+(10 000 * 3.75)]
=[ ]
(50 000+10 000)
= 3. 958333
FOR ACCADEMIC NEEDS CONTACT INFO@UNITUTORIALS.CO.ZA/0651609781
, 1
Number of rights share issue = (50 000 * 5)
= 10 000 𝑠ℎ𝑎𝑟𝑒𝑠
Adjustment factor = 4
3.958333
= 1. 010526
(50 000 * 1.010526) = 50 526. 3
Bonus element= (50 526.3 − 50 000)
= 526. 3
Conclusion
The company`s performance has deteriorated as the earnings per share decreased
from R0.15 or 15c per share to R0.11 or 11c per share.
(b) Diluted earnings per share
Convertible debentures
6
Interest savings = (25 000 * 10% * * 72%)
12
= 𝑅900
6
Increase in ordinary shares = (2 000 * 5 * )
12
= 5 000 𝑠ℎ𝑎𝑟𝑒𝑠
Share Options
4.15 − 3.8
Shares at fair value = [5 000 * ]
4.15
= 422 𝑠ℎ𝑎𝑟𝑒𝑠
5
Bonus element = (422 * )
12
= 174 𝑠ℎ𝑎𝑟𝑒𝑠
Test of Dilution Sequence
Increase in Increase in Earnings per Order of
earnings number of incremental dilution
ordinary share
shares
Convertible debentures 900 5 000 0.18 2
Share options 0 422 0 1
FOR ACCADEMIC NEEDS CONTACT INFO@UNITUTORIALS.CO.ZA/0651609781
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller UNISOLUTIONS. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.83. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67232 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now