MAC3703
Assignment 2 Semester 1 2025
Unique #:520743
Due Date: 30 April 2025
Detailed solutions, explanations, workings
and references.
+27 81 278 3372
, QUESTION 1
a.
DATE CALCULATION WEIGHTED
SHARES
01-Jan-20 50,000 × 12/12 50,000
01-Mar-20 50,000 x 1/5 rights shares × 10/12 8,333
01-May-20 10,000 new shares issued × 8/12 6,667
Total 65,000
Basic Earnings per Share
= 7 200/65 000
= 0.1108
Diluted Earnings Per Share
CONVERTIBLE DEBENTURES
2,000 debentures × 5 shares = 10,000 shares (potentially added)
Adjusted shares: 65,000 + 10,000 =75 000
Annual interest = R25,000 × 10% = R2,500
After-tax interest saved = R2,500 × (1 - 0.28) = R1,800
Adjusted Earnings = 7,200 + 1,800 = 9,000
SHARE OPTIONS (5,000 @ R3.80)
Use treasury stock method:
Option proceeds = 5,000 × R3.80 = R19,000
Shares that could be repurchased at market value of R4.15 = R19,000 /
4.15 = 4,578 shares
Net increase in shares = 5,000 - 4,578 = 422
Total diluted shares = 75,000 + 422 = 75,422
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, Diluted EPS = 9,000/75,422 = 0.1193
Calendar Ltd’s Basic EPS decreased from R0.15 in 2019 to R0.11 in 2020,
indicating a decline in profitability per share, even though the company’s net profit
is only slightly lower than 2019. This decline in EPS is largely due to a significant
increase in the number of shares in issue—from rights issue, new share issue,
and convertible instruments.
The Diluted EPS of R0.12 shows that if all dilutive potential shares are
considered, the performance is slightly better than Basic EPS, reflecting the effect
of financing through convertible instruments and share options.
Calendar’s performance on a per-share basis has declined compared to the prior
year.
b.
Diluted Earnings Per Share
CONVERTIBLE DEBENTURES
2,000 debentures × 5 shares = 10,000 shares (potentially added)
Adjusted shares: 65,000 + 10,000 =75 000
Annual interest = R25,000 × 10% = R2,500
After-tax interest saved = R2,500 × (1 - 0.28) = R1,800
Adjusted Earnings = 7,200 + 1,800 = 9,000
SHARE OPTIONS (5,000 @ R3.80)
Use treasury stock method:
Varsity Cube 2025 +27 81 278 3372
Assignment 2 Semester 1 2025
Unique #:520743
Due Date: 30 April 2025
Detailed solutions, explanations, workings
and references.
+27 81 278 3372
, QUESTION 1
a.
DATE CALCULATION WEIGHTED
SHARES
01-Jan-20 50,000 × 12/12 50,000
01-Mar-20 50,000 x 1/5 rights shares × 10/12 8,333
01-May-20 10,000 new shares issued × 8/12 6,667
Total 65,000
Basic Earnings per Share
= 7 200/65 000
= 0.1108
Diluted Earnings Per Share
CONVERTIBLE DEBENTURES
2,000 debentures × 5 shares = 10,000 shares (potentially added)
Adjusted shares: 65,000 + 10,000 =75 000
Annual interest = R25,000 × 10% = R2,500
After-tax interest saved = R2,500 × (1 - 0.28) = R1,800
Adjusted Earnings = 7,200 + 1,800 = 9,000
SHARE OPTIONS (5,000 @ R3.80)
Use treasury stock method:
Option proceeds = 5,000 × R3.80 = R19,000
Shares that could be repurchased at market value of R4.15 = R19,000 /
4.15 = 4,578 shares
Net increase in shares = 5,000 - 4,578 = 422
Total diluted shares = 75,000 + 422 = 75,422
Varsity Cube 2025 +27 81 278 3372
, Diluted EPS = 9,000/75,422 = 0.1193
Calendar Ltd’s Basic EPS decreased from R0.15 in 2019 to R0.11 in 2020,
indicating a decline in profitability per share, even though the company’s net profit
is only slightly lower than 2019. This decline in EPS is largely due to a significant
increase in the number of shares in issue—from rights issue, new share issue,
and convertible instruments.
The Diluted EPS of R0.12 shows that if all dilutive potential shares are
considered, the performance is slightly better than Basic EPS, reflecting the effect
of financing through convertible instruments and share options.
Calendar’s performance on a per-share basis has declined compared to the prior
year.
b.
Diluted Earnings Per Share
CONVERTIBLE DEBENTURES
2,000 debentures × 5 shares = 10,000 shares (potentially added)
Adjusted shares: 65,000 + 10,000 =75 000
Annual interest = R25,000 × 10% = R2,500
After-tax interest saved = R2,500 × (1 - 0.28) = R1,800
Adjusted Earnings = 7,200 + 1,800 = 9,000
SHARE OPTIONS (5,000 @ R3.80)
Use treasury stock method:
Varsity Cube 2025 +27 81 278 3372
