Perhaps I was a bit harsh. I apologize.
I'm not sure you understand the dilutive effect of 117,000 new shares on a company with approximately 24,000,000 shares issued and outstanding--whether or not the company repurchased the shares (treasury stock) or issued new stock. Most likely INTS purchased the shares on the open market under an authorized repurchase plan. Therefore I think your confusion is based on the difference between GAAP accrual accounting and cash accounting. This is assuming the options were granted and therefore expensed (non-cash salary expense)at least 12 months ago. So let me propose a test on a concept that is simpler. Equipment purchases.
Here it is: I challenge you to post your answer.
This is hypothetical, of course.
Company A produces the same exact product as Company B. In fact, both have the same: (1) price, (2) cost structure, (3) tax rate and (4) cost of capital are identical. Therefore, after 363 days on December 30th of a given year, both companies had each earned $1 million or $1.00 per share (assuming each Company has exactly 1,000,000 shares issued and outstanding). However, on December 31, Company B purchased a corporate jet for $750,000(I said hypothetical). Company B paid for the jet with $500,000 in cash and $250,000 in debt.
If Company A and Company B close their fiscal year end at the same time on December 31, what are the EPS at Company A and Company B? |
