Answer:
A. £4.15
B.£4
Explanation:
A. Calculation for the diluted EPS for 2019
Using this formula
2019 Diluted EPS =(Earnings after tax for the year ended-Preferred Dividends)/Total Diluted Shares Outstanding
Let plug in the formula
2019 Diluted EPS=[£5,000,000-(£2.50 per share*50,000)/£1,000,000+ (£250,000*500/£1,000)+(50,000*£1)]
2019 Diluted EPS=[£5,000,000-(£2.50 per share*50,000)/£1,000,000+ (£250,000*0.5)+(50,000*£1)]
2019 Diluted EPS=[(£5,000,000-£125,000)/(£1,000,000+£125,000+£50,000)]
2019 Diluted EPS=£4,875,000/£1,175,000
2019 Diluted EPS=£4.15
Therefore 2019 Diluted EPS (Earning per share) will be £4.15
B. Calculation for the diluted EPS assuming that the convertible preference shares were receiving a dividend of £6 per share instead of £2.50.
Diluted EPS=[£5,000,000-(£6 per share*50,000)/£1,000,000+ (£250,000*500/£1,000)+(50,000*£1)]
Diluted EPS=[£5,000,000-(£6 per share*50,000)/£1,000,000+ (£250,000*0.5)+(50,000*£1)]
Diluted EPS=[(£5,000,000-£300,000)/(£1,000,000+£125,000+£50,000)]
Diluted EPS=£4,700,000/£1,175,000
Diluted EPS=£4
Therefore the Diluted EPS (Earning per share) will be £4
