Explore BrainMass
Share

Explore BrainMass

    Diluted EPS: Convertible bonds & Convertible preferred stock

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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.

    © BrainMass Inc. brainmass.com October 10, 2019, 6:35 am ad1c9bdddf
    https://brainmass.com/business/options/549380

    Solution Summary

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

    $2.19