Problem1.

1. after-tax loss to S/H

Tax benefit
Tax rate
Total loss
Net loss (after-tax loss)
2. Reformulated S/H Equity Statement
Common Shareholders' Equity Beginning Balance
CSE B.B.
preferred stock
non-controlling interest
dividend payable

$
$
$

87.50
35%
250.00
162.50

$
$
$
$
$

2,228.00
2,228.00

Net transaction with C.S.

Issuance of C.S. to the market
Conversion into C.S.
Issue of C.S. - exercise of stock options

$
$
$
$
Repurchase of C.S. (809.60)
Cash dividend $
Net income
OCI

Ending Balance

$
loss from stock options (162.50)
loss from conversion $
$
loss from repurchase (202.40)
unrealized holding gain on investment $
$

3. Reformulated total liabilities = 3060+106 = 3166

Or : Total asset
Reformulated Shareholders Equity
Reformulated total liabilities
4. Estimate of the option overhang at the end of 2015
Market price of shares to be issued for options
exercise price
Tax benefit
Contigent liability

$
$
(2,177.00)
$

$
$
$
$
$

46.00
387.50

672.00

18.00
2,177.00

5,343.00

3,166.00

1,482.00
1,092.00
390.00
136.50
253.50

Problem 2.
Common Shareholders' Equity Beginning Balance

7,470.00

Net transaction with C.S.

Issuance of C.S. to the market
Conversion into C.S.
Issue of C.S. - exercise of stock options
Repurchase of C.S.
Cash dividend

$
$
$
$
$

365.00
1,050.00
883.00
(360.00)
(265.00)

Net income
loss from stock options
loss from conversion
loss from repurchase
unrealized holding gain on investment
cash dividend to preferred shareholders

$ 1,350.00
$
(133.00)*
$
(350.00)
$
(90.00)
$
90.00
$
(170.00)
$ 9,840.00

Ending Balance
9840 = 11525-1820+135
*after-tax loss to S/H
Tax benefit
Tax rate
Total loss
Net loss (after-tax loss)

$
57.00
30%
$
190.00
$
133.00

=8750-1400+120

1,673.00

697.00

=7470+1673+697