{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

PROBLEM 16-7

# PROBLEM 16-7 - a \$3,000,000 X.06 Preferred stock is not...

This preview shows pages 1–3. Sign up to view the full content.

PROBLEM 16-7

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
(a) Basic EPS = \$1,200,000 – (\$3,000,000 X .06) 600,000* = \$1.70 per share *\$6,000,000 ÷ \$10 (b) Diluted EPS = (Net income – Preferred dividends) + Interest savings (net of tax) Average common shares + Potentially dilutive common shares = \$1,200,000 – \$180,000 a + \$96,000 b 600,000 + 10,000 c + 80,000 d = \$1,116,000 690,000 = \$1.62 per share
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: a \$3,000,000 X .06; Preferred stock is not assumed converted since conversion would be antidilutive. b \$2,000,000 X .08 X (1 – .40) c Market price – Option price X Number of options = incremental shares Market price \$25 – \$20 X 50,000 = 10,000 \$25 d (\$2,000,000 ÷ \$1,000) X 40 shares/bond...
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern