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Income/Loss to Shareholders

Please show work to all answers as this is being used as a study guide.

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 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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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