Giraffe Ltd has a financial year end of 31 December. On 1 July 2011, Giraffe issued 5-year, 3% per annum, convertible bonds with face value of $200,000 at par. If issued on the same date, similar bonds without the convertible feature would have been sold for $174,409 at the prevailing market interest rate of 6% per annum. The interest payment is to be made semiannually on 30 June and 31 December. Since issuance, no conversion has occurred and by the end of 2012, the conversion feature was such that each $5 bond could be exchanged for 1.2 ordinary shares.

For its financial year ending 31 December 2011, Giraffe Ltd reported a basic EPS of $1.80. After taking into consideration of all potentially dilutive securities, Giraffe Ltd also reported a diluted EPS of $1.62.

At the beginning of 2012, Giraffe Ltd had 900,000 common shares. To fund Giraffe’s expansion, the CEO, Mr. Stone, decided to aggressively raise funds in 2012. On 1 April 2012, Giraffe Ltd issued 125,000 cumulative preference shares at $8.00 per share. The preference shares carry an annual dividend of $0.40 per share. No preferred dividends have been paid since issuance. On 1 July 2012, Giraffe Ltd issued a 20% stock bonus. On 1 October 2012, Giraffe issued additional 100,000 common shares at $6.00 per share.

At the beginning of 2012, there were 40,000 unvested stock options and no additional stock options were granted since then. No employees have exercised their stock options and the average market price of Giraffe’s common share in 2012 was $6.25. At the end of 2012, each option permitted its holder to buy two shares of common share at an exercise price of $5.00 per common share.

Giraffe Ltd reported a net income (before tax) of $1,149,118 for the financial year ended 31 December 2012. It is subjected to a corporate tax rate of 15%.

Required:

Mr. Stone has asked for your assistance in computing the basic and diluted earnings per share for the year ended 31 December 2012. In addition, you are to report the 2011 comparative basic and diluted earnings per share. Show your workings. Hint: 2012 DEPS = $0.811

Answer rating: 100% (QA)

determining profits per share 2011 was the final d... View the full answer