Calculation Qs

Question 1

1. Let’s say a company has 100 shares outstanding, at a share price of $10.00 each. It also has 10 options outstanding at an exercise price of $5.00 each – what is its Diluted Equity Value?s

Answer 1

Basic equity value = 1000
10 new shares created, so DEV = 1100
Firm received 50
TSM, so firm buys back 5 stocks
So 5 new shares created - DEV of 1050

Question 2

2. Let’s say a company has 100 shares outstanding, at a share price of $10 each. It also has 10 options outstanding at an exercise price of $15 each – what is its Diluted Equity Value?

Answer 2

Options are out of the money, so no one will exercise, so 1000 as there is no dilutive effect

Question 3

3. A company has 1 million shares outstanding at a value of $100 per share. It also has $10 million of convertible bonds, with par value of $1,000 and a conversion price of $50. How do I calculate diluted shares outstanding?

Answer 3

basic equity value = 100 million
- divide convertible bonds by par value to find out how many individual bonds.
10 mil/ 1000 = 10000 convertible bonds
1000/50 = 20 shares per bond.
20x10000 = 200000 new shares
= 1.2 million diluted shares = 120 million DEV

Question 4

4. Let’s say that a company has 10,000 shares outstanding and a current share price of $20.00. It also has 100 options outstanding at an exercise price of $10.00.
   It also has 50 Restricted Stock Units (RSUs) outstanding.
   Finally, it also has 100 convertible bonds outstanding, at a conversion price of
   $10.00 and par value of $100.
   What is its Diluted Equity Value?

Answer 4

Basic EV = 200k
Firms receive 1k, buy back 50 options, so 10050 shares.
+ 50 RSUs, so 10100 shares
100 convertible bonds/ 10 = 10 new shares per bond
= 1000 new bonds
Therefore diluted share count = 11100, DEV = 222k

Question 5

5. This same company also has Cash of $10,000, Debt of $30,000, and Noncontrolling Interests of $15,000. What is its Enterprise Value?

Answer 5

-10k + 30k + 15k + 222k

257k