PUZZLE 11.4 COMPREHENSIVE EXAMPLE-BASIC AND DILUTED Extracts from group financial statements of AB, a public limited company, year ended April 30, 20X1 $m Profit from continuing operations 35,000 Loss on discontinued operations (tax relief $500 million) (1,500) Income tax (7,500) Minority interest (loss on discontinued activities $500 million) (1,500) Preference share appropriation-dividend (2 years) (30) -other (5) Share capital at April 30, 20X1 Ordinary shares of $1 1,000 5% Convertible preference shares 300 Other Information a) On January 1, 20X1, 48 million ordinary shares were issued on the acquisition of CD plc at a valuation of $190 million. If CD earns cumulative profits in excess of $8,000 million up to April 30, 20X2, an additional 10 million shares are issuable to the vendors. If the profits do not reach that amount, then only 2 million shares are issuable on April 30, 20X2. b) The profits for the three months to April 30, 20X1, are $1,200 million. c) On May 11, 20X1, there was a bonus issue of one for four ordinary shares. The financial statements are made up to April 30, 20X1, and had not yet been published. d) The company has a share option scheme. The directors exercised options relating to 18 million shares on February 28, 20X1, at a price of $3 per share. In addition, options were granted during the year on March 1, 20X1, to subscribe for 10 million shares at $2 each. The fair value of the shares on March 1, 20X1, was $4, and the average fair value for the year was $5. e) The preference shares are convertible into ordinary shares on May 1, 20X2, on the basis of one ordinary share for every two preference shares or on May 1, 20X3, on the basis of one ordinary share for every four preference shares. f) There is a profit share scheme in operation whereby employees receive a bonus of 5% of profits from continuing operations after tax and preference dividends. g) XY plc, a 100% owned subsidiary of AB, has in issue 9% convertible bonds of $200 million that can be converted into one ordinary share of AB for every $10 worth of bonds. Income tax is levied at 33%. Required Calculate basic and diluted earnings per share.