In this workout, we're asked to calculate basic EPS. We start by being told that they've got net income, preferred stock of 7.5% and shares outstanding at the beginning of the period. The footnotes specify that the preferred stock has been treated as equity. Now, that's important because that 7.5% preferred stock pays a dividend and dividends are paid out of net income. If instead, the preferred stock had been treated as debt, then this 7.5% of the 100,000 would be interest and it would already have been deducted in getting to that net income figure. The next thing we're told is that there have been some share repurchases, one on March the 31st and one on October the first. So, there's two things we need to do here. To get to EPS, we need to adjust the earnings, the numerator of EPS and we need to adjust the number of shares, the denominator. So, we start with net income. This was given to us of 674,200. From that, we need to deduct the preferred stock dividends. So, I go up to my preferred stock for 100,000 and it paid a 7.5% dividend. So, my net income now attributable to common shareholders. once the preferred stock dividend's been paid, is the 674,200 less that dividend, getting us to 666,700.

Next up, we now need to change the EPS denominator, the number of shares outstanding. Here, I've already started this. I've got a table prepared already. On January the first, the number of shares we had was given to us at the top. That was 542,800.

Because we started the year with that number that I'm gonna take 12 divided by 12, change that to a percentage to give that a waiting of 100%. Now, on March the 31st the business bought back 30,000 new shares. So, I'm going to subtract 30,000 and the waiting here, how many months does that affect? It affects all of the months going forward. There were nine months after March 31st, so nine divided by 12. Again, change that to a percentage. Lastly, on October the first, they bought back another 15,000. How many months does that affect? Well, that just affects the whole of October, November and December? So, 3/12, 25% of the year. So, if I now multiply the number by the weight and copy that down and then add up all of those figures, we get to our weighted average shares that sounding of 516,550. I've now got both parts that I need to do my EPS calculation. I take the net income due to common shareholders, divide that by the WASSO, and that gets me a figure of 1.29.