MAC3703
ASSIGNMENT 2 SEMESTER 1 2025
UNIQUE NO:
DUE DATE: 30 APRIL 2025
,MAC3703 – Assignment 2 (Semester 1, 2025)
Module: Selected Accounting & Financial Management Techniques
Unique Number: [Insert your number]
Due Date: 30 April 2025
QUESTION 1(a): Calculation and Discussion of Earnings Per Share (EPS)
(10 marks)
Step-by-step Calculation:
Step 1: Calculate Net Profit after Tax
Profit before tax: R10 000
Income tax (28% of R10 000):
= R10 000 × 0.28 = R2 800
Net profit after tax:
= R10 000 – R2 800 = R7 200
Step 2: Determine the Weighted Average Number of Shares
We assume the company made a rights issue during the year. Let’s use the following
assumptions for illustration (you can replace these with actual figures from your
question paper):
Shares at beginning of year (1 Jan 2020): 50 000 shares
Rights issue on 1 March 2020: 10 000 new shares issued
, 1 new share for every 5 shares held →
New shares issued = 50 000 ÷ 5 = 10 000 shares
Theoretical ex-rights price (TERP):
= (Market price + Proceeds from rights) ÷ (Old shares + New shares)
= [(50 000 × R4) + (10 000 × R3.75)] ÷ (50 000 + 10 000)
= (R200 000 + R37 500) ÷ 60 000
= R237 500 ÷ 60 000
= R3.9583 per share
Rights adjustment factor = Market price before rights ÷ TERP
= R4 ÷ R3.9583
= 1.0105
Thus, all prior shares must be adjusted by multiplying by 1.0105.
Adjusted opening shares = 50 000 × 1.0105 = 50 525 shares
New rights shares issued:
= 10 000 shares (already adjusted)
Effective date: All exercised on 31 March 2020.
So, from 1 April 2020 to 31 December 2020 → 9 months
Weighted impact:
10 000 × (9 ÷ 12) = 7 500
Additional Share Issue on 1 May 2020:
10 000 shares issued
Weighted impact:
, 10 000 × (8 ÷ 12) = 6 667
No shares yet for convertible debentures and options (potential shares for dilution
purposes).
Step 3: Total Weighted Average Shares
Total weighted average shares:
= Adjusted opening shares + rights shares (weighted) + additional shares (weighted)
= 50 525 + 7 500 + 6 667
= 64 692 shares
Step 4: Calculate Basic EPS
Basic EPS = Net Profit after Tax ÷ Weighted Average Shares
= R7 200 ÷ 64 692
= R0.1113 per share
Rounded:
➡️ Basic EPS = 11.13 cents per share
Step 5: Discuss the company's performance
In 2019, the reported EPS was 15 cents (given).
In 2020, the EPS decreased to 11.13 cents.
Analysis:
o The decrease in EPS shows that although the company grew in terms of
number of shares (via rights issue and acquisition financing), its
profitability per share decreased.
o This could be because profit levels remained low (only R10 000 profit
before tax), while the number of shares increased significantly.
o The impact of the acquisition and new investments might not yet have
improved profits but increased the share base.
ASSIGNMENT 2 SEMESTER 1 2025
UNIQUE NO:
DUE DATE: 30 APRIL 2025
,MAC3703 – Assignment 2 (Semester 1, 2025)
Module: Selected Accounting & Financial Management Techniques
Unique Number: [Insert your number]
Due Date: 30 April 2025
QUESTION 1(a): Calculation and Discussion of Earnings Per Share (EPS)
(10 marks)
Step-by-step Calculation:
Step 1: Calculate Net Profit after Tax
Profit before tax: R10 000
Income tax (28% of R10 000):
= R10 000 × 0.28 = R2 800
Net profit after tax:
= R10 000 – R2 800 = R7 200
Step 2: Determine the Weighted Average Number of Shares
We assume the company made a rights issue during the year. Let’s use the following
assumptions for illustration (you can replace these with actual figures from your
question paper):
Shares at beginning of year (1 Jan 2020): 50 000 shares
Rights issue on 1 March 2020: 10 000 new shares issued
, 1 new share for every 5 shares held →
New shares issued = 50 000 ÷ 5 = 10 000 shares
Theoretical ex-rights price (TERP):
= (Market price + Proceeds from rights) ÷ (Old shares + New shares)
= [(50 000 × R4) + (10 000 × R3.75)] ÷ (50 000 + 10 000)
= (R200 000 + R37 500) ÷ 60 000
= R237 500 ÷ 60 000
= R3.9583 per share
Rights adjustment factor = Market price before rights ÷ TERP
= R4 ÷ R3.9583
= 1.0105
Thus, all prior shares must be adjusted by multiplying by 1.0105.
Adjusted opening shares = 50 000 × 1.0105 = 50 525 shares
New rights shares issued:
= 10 000 shares (already adjusted)
Effective date: All exercised on 31 March 2020.
So, from 1 April 2020 to 31 December 2020 → 9 months
Weighted impact:
10 000 × (9 ÷ 12) = 7 500
Additional Share Issue on 1 May 2020:
10 000 shares issued
Weighted impact:
, 10 000 × (8 ÷ 12) = 6 667
No shares yet for convertible debentures and options (potential shares for dilution
purposes).
Step 3: Total Weighted Average Shares
Total weighted average shares:
= Adjusted opening shares + rights shares (weighted) + additional shares (weighted)
= 50 525 + 7 500 + 6 667
= 64 692 shares
Step 4: Calculate Basic EPS
Basic EPS = Net Profit after Tax ÷ Weighted Average Shares
= R7 200 ÷ 64 692
= R0.1113 per share
Rounded:
➡️ Basic EPS = 11.13 cents per share
Step 5: Discuss the company's performance
In 2019, the reported EPS was 15 cents (given).
In 2020, the EPS decreased to 11.13 cents.
Analysis:
o The decrease in EPS shows that although the company grew in terms of
number of shares (via rights issue and acquisition financing), its
profitability per share decreased.
o This could be because profit levels remained low (only R10 000 profit
before tax), while the number of shares increased significantly.
o The impact of the acquisition and new investments might not yet have
improved profits but increased the share base.
