Assignment - One calculative question and an essay question for 500 words.
Question 1 - EPS
The following summarised information is available in relation to 'La Scan, a publicly listed company in Australia:
Statement of comprehensive income extracts for years ended 30th June:
|
|
2018
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2017
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|
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Continuing
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Discontinued
|
Continuing
|
Discontinued
|
|
|
$'000
|
$'000
|
$'000
|
$'000
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|
Profit after tax from:
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|
|
|
|
|
Existing operation
|
2,000
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(750)
|
1750
|
600
|
|
Newly acquired operations*
|
450
|
|
nil
|
|
* Acquired on the 1st November 2017.
Analyst expect profits from the market sector in which La Scan's existing operations are based to increase by 6% in the year to 30th June 2019 and by 8% in the sector of its newly acquired operations.
On 1st July 2016 La Scan had:
- $12 million of $1 ordinary shares in issue.
- $5 million 8% convertible debentures 2023; the terms of conversion are 40 equity shares in exchange for each $100 of debenture.
- On 1 January 2018 the directors of La Scan were granted options to buy 2 million shares in the company for $1 each. The average market price of La Scan's shares for the year ending 30th June 2018 was $2.50 each.
Assume an income tax rate of 30% for year 2016, 2017 and 2018.
Required:
(i) Calculate La Scan's estimated profit after tax for the year ending 30 June 2019 assuming the analysts' expectations prove correct.
(ii) Calculate the diluted earnings per share (EPS) on the continuing operations of La Scan for the year ended 30 June 2018 and the comparatives for 2017.
Question 2 - Explain the concepts coercive isomorphism and normative isomorphism. How can these concepts be used to explain voluntary corporate reporting practices?