d) Clarendon Plcs issued share capital is currently 4,000,000 ordinary shares of $0.50 each. On October 1,
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Question:
d) Clarendon Plc’s issued share capital is currently 4,000,000 ordinary shares of $0.50 each. On October 1, 2012 the company issued $2,000,000 worth of 9% convertible loan stocks. Each $500 nominal worth of loan stock is convertible over the next three years as follows:
On December 31, 2012 350 shares
On December 31, 2013 320 shares
On December 31, 2014 300 shares
The following are the trading results for the years ended December 31:
2012 2013
Net Profit before interest and tax $3,200,000 $3,600,000
The applicable tax rate is 35%.
Required:
- Calculate the basic EPS for 2012 and 2013
- Calculate the diluted EPS for 2012 and 2013
Explain briefly to a potential investor the significance of diluted EPS
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