The flowing numbers come from an equity statement for fiscalyear 2011 (in millions):
Shareholders’ equity May 31, 2010 $2,700
Issue of shares for exercise of stock options 405
Repurchase of shares (132)
Net income 467
Unrealized loss on debt securities (23)
Tax benefit from the exercise of stock options 70
Common dividends paid (250)
Preferred dividends paid (10)
Shareholders’ equity May 31, 2011 3,227
The firm’s tax rate is 35 percent. Shareholders’ equity at May31, 2010 includes $120 million in preferred stock.
a. Calculate the loss to common shareholders from the exerciseof stock options.
b. Present a reformulated statement of common shareholders’equity that identifies comprehensive income and separates it fromnet payout to shareholders.
c. What was the return on common equity (ROCE) for the year?(Use beginning equity in this calculation.)
