91Ó°ÊÓ

A metric or financial calculation is done by a business entity for the determination of the profitability of each share is known as earnings per share. It is used for analysis by equity investors.

$\begin{array}{c}Earnings\text{ }per\text{ }share=\frac{Earnings}{Shares}\\ =\frac{\$9,000,000}{1,200,000}\\ =\$7.50\end{array}$

$\begin{array}{c}Diluted\text{ }earning\text{ }per\text{​â¶Ä‰}share=\frac{\text{ }Earnings\text{ }after\text{ }taxes}{Shares\text{ }outstanding+Assumed\text{ }net\text{ }increase\text{ }insharesfromthewarrants}\\ =\frac{\$9,000,000}{1,200,000+70,000}\\ =\frac{\$9,000,000}{1,270,000}\\ =\$7.09\end{array}$

Working notes:

Calculation of the amount of assumed net increase in shares from the warrants

Note:

Cash proceeds 100,000 @ $15 = $1,500,000

The current price of the stock is $50

Assumed reduction in shares outstanding from

purchase of shares with cash received

$\begin{array}{c}Proceeds=\frac{Cash\text{​â¶Ä‰}proceeds}{Price\text{ }of\text{ }stock}\\ =\frac{\$1,500,000}{\$50}\\ =30,000\end{array}$

Assume a net increase in shares from the exercise of warrants