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Unformatted text preview: In-Class Activity #6 (30 points)List the two members of todays activity__________________________________________________________________The information below pertains to ABC inc. for 2007:Net Income for the year$750,0005% convertible cumulative preferred stock, $100 par value. Each share is convertible into 6 shares of common stock$400,0007% convertible bonds issued at par ($1,000 per bond). Each bond is convertible into 20 shares of common stock$500,000Common stock, $1 par value$500,000Common stock options (granted in a prior year) to purchase 100,000 shares of common stock at $50 per share$335,000Average market price per share for common stock$ 45.00Tax rate40%What is basic EPS? (10 points)Basic EPS = 1.46 = (750,000 20,000)/500,000Pref Dividends = 20,000 = 5%*100*(4,000 shares of pref stock)Using the if converted method, is the convertible preferred stock dilutive? State YES or NO and both the numerator and denominator effects in your answer (10 points)Numerator effect = Pref Dividends = 20,000Denominator effect = 24,000 = 6*4,000Ratio = 20,000/24,000 = 0.83 < 1.46 Ratio = 20,000/24,000 = 0....
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This note was uploaded on 12/04/2009 for the course MGMT 351 taught by Professor Staff during the Fall '08 term at Purdue University-West Lafayette.
- Fall '08