BMAN21020 Question 4: Earnings Per Share. Brook plc (Brook) reported an earnings per share of 32p for the year ended 31 December 2020. For both years ending 31 December 2021 and

2022, Brook had in issue 4 million £1 cumulative preference shares which pay 10% of their nominal value as an annual dividend. During the year ended 31 December 2021: On 1 January 2021 Brook had 5 million ordinary shares in issue. On 1 October 2021 Brook made a rights issue on the basis of one share for every five in issue, at a cum rights price of £3.00, when the market price per share was £6.00. Brook reported a profit after tax of £2.2 million for the year. In addition to the dividends to preference shareholders, Brook distributed £1.4 million as ordinary dividends. During the year ended 31 December 2022: On 1 April 2022, Brook made a bonus issue on the basis of one share for every three in issue. Brook reported a profit after tax of £4.5 million for the year ended 31 December 2022. In addition to preference shareholders dividends, Brook distributed £1.4 million as ordinary dividends. Brook also issued £4 million worth of 5% convertible loan stock at par on 1 July 2022, redeemable at par on 30 June 2025 or convertible into 20 shares per £100 at the choice of the holder. The applicable tax rate for Brook is 20%. Required: a) Calculate Brook's earnings per share (EPS) that would be reported in the financial statements for the year ended 31 December 2021, including a comparative EPS for 2020. (10 marks) b) Calculate Brook's earnings per share (EPS) that would be reported in the financial statements for the year ended 31 December 2022, including a comparative EPS for 2021. (6 marks) c) Calculate Brook's Diluted Earnings per Share for the year ended 31 December 2022 and explain why this is regarded as useful information for the ordinary shareholders of Brook, in addition to the Basic Earnings per Share. (9 marks) (Total 25 marks)