1 of 1 EXTRA CREDIT 2 EARNINGS PER SHARE - 12 POINTS $500 milion 300 million shares 48 million shares 18 million shares 4 million shares $70 $100 milion Al December 31, 2045, the financial statements of Litle Manufacturing showed the following Net Income (after-tax) Common Stock, S1 par: Shares outstanding on January 1 Shares retired for cash on February 1 Shares sold for cash on September 1 Incentive stock options outstanding, fully vested Preferred Stock: Preferred stock, 10%, $70 par, nonconvertible Preferred stock, 8%, $50 par, convertible into 2 milion shares of common stock Bonds Payable: 12.5% bonds, convertible into 20 milion shares of common stock Additional data: The market price of the common stock averaged $20 during 20Y5. The year-end price was $24. The convertible preferred stock and bonds had been issued at par in 20Y1. The exercise price of the stock options is $15 per share. Both preferred stock dividends were declared and paid. The tax rate for the year is 40%. REQUIREMENTS: Use the above information to answer the following questions: 1. What is the numerator in Litle's Basic EPS calculation? $200 milion 2 What is the denominator in Lite's Basic EPS calculation? 3. What is the dilution index for Little's convertible preferred stock? 4. What is the dilution index for Litle's convertible bonds? 5. In applying the treasury stock method for Litte's incentive stock options, how many new shares would need to be issued as a result of the assumed (if-converted) option exercise? in other words, what is the denominator of the dilution index for Little's incentive stock options? 6. What is Little's Diluted EPS? Please round your answer to 3 decimal places. EXTRA CREDIT 2 PAGE 1 1 of 1 EXTRA CREDIT 2 EARNINGS PER SHARE - 12 POINTS $500 milion 300 million shares 48 million shares 18 million shares 4 million shares $70 $100 milion Al December 31, 2045, the financial statements of Litle Manufacturing showed the following Net Income (after-tax) Common Stock, S1 par: Shares outstanding on January 1 Shares retired for cash on February 1 Shares sold for cash on September 1 Incentive stock options outstanding, fully vested Preferred Stock: Preferred stock, 10%, $70 par, nonconvertible Preferred stock, 8%, $50 par, convertible into 2 milion shares of common stock Bonds Payable: 12.5% bonds, convertible into 20 milion shares of common stock Additional data: The market price of the common stock averaged $20 during 20Y5. The year-end price was $24. The convertible preferred stock and bonds had been issued at par in 20Y1. The exercise price of the stock options is $15 per share. Both preferred stock dividends were declared and paid. The tax rate for the year is 40%. REQUIREMENTS: Use the above information to answer the following questions: 1. What is the numerator in Litle's Basic EPS calculation? $200 milion 2 What is the denominator in Lite's Basic EPS calculation? 3. What is the dilution index for Little's convertible preferred stock? 4. What is the dilution index for Litle's convertible bonds? 5. In applying the treasury stock method for Litte's incentive stock options, how many new shares would need to be issued as a result of the assumed (if-converted) option exercise? in other words, what is the denominator of the dilution index for Little's incentive stock options? 6. What is Little's Diluted EPS? Please round your answer to 3 decimal places. EXTRA CREDIT 2 PAGE 1
