Niles Company granted 9 million of its no par common shares to executives, subject to forfeiture...

Niles Company granted 9 million of its no par common shares to executives, subject to forfeiture if employment is terminated within three years. The common shares have a market price of $5 per share on January 1, 2020, the grant date of the restricted stock award. When calculating diluted EPS at December 31, 2021, what will be the net increase in the weighted-average number of shares outstanding if the market price of the common shares averaged $5 per share during 2021?

Solutions

Expert Solution

The total compensation for the award is $45 million ($5 market price per share x 9 million shares). Because the stock award vests over three years, it is expensed as $15 million each year for three years. At the end of 2021, the second year, $30 million has been expensed and $15 million remains unexpensed, so $15 million would be the assumed proceeds in an EPS calculation. If the market price averages $5, the $15 million will buy back 3 million shares and we would add to the denominator of diluted EPS 6 million common shares:

No adjustment to the numerator

9 million – 3* million = 6 million

*Assumed purchase of treasury shares

$15 million

÷ $5 (average market price)

3 million shares

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

A company granted compensation through restricted shares to four of its executives, with a market value...

A company granted compensation through restricted shares to four of its executives, with a market value of $ 600,000 and a period of service of four years. When granting the compensation plan, the company made the following entry: Deferred compensation 600,000 Common srock 30,000 Paid-in capital in excess of par value 570,000 In each of the first two years the company made the following entry: Compensation expense 150,000 Deferred compensation 150,000 During the third year, one of the executives resigned...

A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9...

A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9 per share. Subsequently, the company declared and issued a 10% stock dividend. The market price of the shares is $20 per share. 53. What is the effect of the dividend on Paid in Capital? a. Paid-in Capital decreased b. Paid-in Capital increased c. Paid-in Capital remained the same d. None of the above 54. Refer to the previous question. By what amount did Paid...

ABC grants 1,000 new shares of $5 par common stock to each of five executives on...

ABC grants 1,000 new shares of $5 par common stock to each of five executives on January 1, 2021. The 5,000 shares have a total fair value of $87,000 at grant. The shares will vest on December 31, 2023 after three years (not prorated) of continued employment with ABC. ABC expects four employees to fulfill the vesting requirements, and no other restrictions apply. 3. If all five executives unexpectedly left the company on 1/1/23, what entry would ABC prepare that...

A company has 9 million shares of common stock outstanding, 340,000 shares of 6 percent preferred...

A company has 9 million shares of common stock outstanding, 340,000 shares of 6 percent preferred stock outstanding, and 180,000 7.8 percent semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $38 per share and has a beta of 1.50, the preferred stock currently sells for $88 per share, and the bonds have 20 years to maturity and sell for 119 percent of par. The market risk premium is 7.8 percent, T-bills are yielding 3 percent,...

On December 31, 20X0, Kessler Company granted six executives options for each to purchase 10,000 shares...

On December 31, 20X0, Kessler Company granted six executives options for each to purchase 10,000 shares of the company's $10 par common stock at an option price of $50 per share (a total of 60,000 options). The options become exercisable on January 1, 20X1, and represent compensation for executives' services over a three-year period beginning January 1, 20X1. The Black-Scholes option pricing model determines the option fair value to be $1. Through December 31, 20X2, none of the executives had...

McBean Company has outstanding 15 million shares of $3 par value common stock and 1.5 million...

McBean Company has outstanding 15 million shares of $3 par value common stock and 1.5 million shares of $5 par value preferred stock. The preferred stock has a 8% dividend rate. The company declares $9,000,000 in total dividends for the year. Preferred Dividends in arrears are $450,000. a. Compute the amount of dividends to be distributed to preferred shareholders. (Enter your answer in dollars and not in millions.) b. Compute the amount of dividends to be distributed to common shareholders....

Company Z has 2.55 million shares of common stock authorized with a par value of $1...

Company Z has 2.55 million shares of common stock authorized with a par value of $1 and a market price of $61. There are 1.275 million outstanding shares and 0.31875 million shares held in treasury stock. Required: Prepare the journal entry if the company declares and distributes a 10% stock dividend. Show the effect of the 10% stock dividend on assets, liabilities, and stockholders' equity. Prepare the journal entry if the company declares and distributes a 100% stock dividend. Show...

johannesson&johannesson sold 14 million shares of its $5 par common stock to raise capital for a...

johannesson&johannesson sold 14 million shares of its $5 par common stock to raise capital for a voluntary non alcoholic happy hour with affiliated people. Assuming that the issue price is 11$ per share, how should johannesson&johannesson record the sale of the shares

Agee Storage issued 29 million shares of its $1 par common stock at $14 per share...

Agee Storage issued 29 million shares of its $1 par common stock at $14 per share several years ago. Last year, for the first time, Agee reacquired 1 million shares at $12 per share. Assuming that Agee retires shares it reacquires (restores their status to that of authorized but unissued shares), by what amount will Agee’s total paid-in capital decline if it now reacquires 1 million shares at $18 per share? (Enter your answer in millions (i.e., 10,000,000 should be...

A company has 4.3 million shares of common stock outstanding and 85,000 bonds outstanding, par value...

A company has 4.3 million shares of common stock outstanding and 85,000 bonds outstanding, par value of $1,000 each. Each bond has a 6.8 percent annual coupon rate and the bonds have 23 years to maturity and is now selling at $789.23. (Based on the current price, its YTM is 9%) Coupon is paid annually. The common stock currently sells for $58.00 per share and has a beta of 0.90. The market risk premium is 7 percent and Treasury bills are...

Subjects