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    Income/Loss to Shareholders

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    6. The following is a comparative balance sheet for a firm for fiscal year 2002 (in millions of dollars):

    2002 2001 2002 2001
    Operating Cash 60 50 Accounts Payable 1200 1040
    Short-Term Investments (at market) 550 500 Accrued Liabilities 390 450
    Accounts Receivable 940 790 Long-term debt 1840 1970
    Inventory 910 840
    Property and Plant' 2840 2710 Common Equity 1870 1430
    5300 4890 5300 4890

    The following is the statement of common shareholders' equity for 2002 (in millions of dollars):

    Balance, end of fiscal year 2001 1,430
    Share issues from exercised employee stock options 810
    Repurchase of 24 million shares (720)
    Cash dividend (180)
    Tax benefit from exercise of employee stock options 12
    Unrealized gain on investments 50
    Net income 468
    Balance, end of fiscal year 2002 1,870

    The firm's income tax rate is 35%. The firm reported $15 million in interest income and $98 million in interest expense for 2002. Sales revenue was $3,726 million.

    (a) Calculate the loss to shareholders from the exercise of employee stock options during 2002.

    (b) The shares repurchased were in settlement of a forward purchase agreement. The market price of the shares at the time of the repurchase was $25 each. What was the effect of this transaction on the income for the shareholders?

    (c) Prepare a comprehensive income statement that distinguishes after-tax operating income from financing income and expense. Include gains or losses from the transactions in questions (a) and (b) above.

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    https://brainmass.com/business/dividends-stock-repurchase-and-policy/income-loss-to-shareholders-194138

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    Please see the attached file.

    6. The following is a comparative balance sheet for a firm for fiscal year 2002 (in millions of dollars):

    2002 2001 2002 2001
    Operating Cash 60 50 Accounts Payable 1200 1040
    Short-Term Investments (at market) 550 500 Accrued Liabilities 390 450
    Accounts Receivable 940 790 Long-term debt 1840 1970
    Inventory 910 840
    Property and Plant' 2840 2710 Common Equity 1870 1430
    5300 4890 5300 4890

    The following is the statement of common shareholders' equity for 2002 (in millions of dollars):

    Balance, end of fiscal year 2001 1,430
    Share issues from exercised employee stock options 810
    Repurchase of 24 million shares (720)
    Cash dividend (180)
    Tax benefit from exercise of employee stock options 12
    Unrealized gain on investments 50
    Net ...

    Solution Summary

    The solution has calculation for income/loss to shareholders from employee stock options.

    $2.19

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