Purchase Solution

Diluted EPS: Convertible bonds & Convertible preferred stock

Not what you're looking for?

Ask Custom Question

On Jan 1 Yellow Car Company issued 15-year, $50,000,000 face value, 4% bonds, at par value.
Each $1,000 bond is convertible into 20 shares of Yellow Car common stock.
The bonds were not converted in the current year.

Yellow Car's net income in the current year was $8,680,000, and its tax rate was 30%.
The company had 2,650,000 shares of common stock issued and outstanding throughout the current year.

(a) Solve for diluted EPS for the current year.
(b) Solve for diluted EPS for the current year, using the data found above, except instead of the bods, $50,000,000 of 6% convertible preferred stock was issued. Each $100 preferred share is convertible into 2 shares of Yellow Car common stock.

Purchase this Solution

Solution Summary

Your tutorial is attached. Notice the test for anti-dilutive securities for diluted EPS.

Solution provided by:
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution


Free BrainMass Quizzes
Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.