Question

ABC PLC has a year-end of 31st December 2012. During the year, ABC LTD redeemed 80 million of its existing share capital on 30th September 2012. Only 50% of the total amount payable on shares was paid on 30th September. The number of shares outstanding at the start of the year were 130 million. What is the weighted average number of shares to be used in the EPS calculation?

50 million

90 million

110 million

120 million

ABC PLC has a year-end of 31st December 2012. During the year, ABC LTD issued 80 million new shares on 1st October 2012. Only 50% of the total amount receivable on the new shares was called at the time of issue of shares. The number of shares outstanding at the start of the year were 100 million. What is the weighted average number of shares to be used in the EPS calculation?

		180 million
		140 million
		120 million
		110 million

Answer 1

Calculation of weighted average number of shares outstanding
Shares outstanding at start of year	130
Less: Weighted average shares redeemed	10	(80*(3/12)*50%)
Weighted average number of shares outsanding	120	million
Out of 12 months 50% of redeemed shares were not outstanding for 3 months and thus would be deducted from total shares at start of year
Since payment is made for only 50% of shares, only 50% of shares redeemed are used.
Calculation of weighted average number of shares outstanding
Shares outstanding at start of year	100
Add: Weighted average shares redeemed	10	(80*(3/12)*50%)
Weighted average number of shares outstanding	110	million
Out of 12 months the new issued shares are outstanding for 3 months from Oct-Dec and thus weighted average is considered
Since amount received is 50% of shares issued, we are using only 50% of shares issued