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Earnings per share

Example 4

DEPS – Convertibles

Robert had 6,000 ordinary shares in issue throughout the year to
31 December 20X3.

At that date Robert also had in issue $5,000 convertible loan stock with an
effective rate of interest of 10%. Robert’s rate of income tax is 30%.

The loan is convertible into ordinary shares on the basis of 60 shares per
$100 loan.

Robert’s earnings for the year to 31 December 20X3 were $1,200.

Required:

Calculate Robert’s diluted earnings per share for the year to
31 December 20X3.

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