Question
5. The following information was taken from the books and records of Simonic, Inc.: (i) Net Income $ 560,000 (ii) Capital structure: (a) Convertible 6%
5. The following information was taken from the books and records of Simonic, Inc.:
(i) Net Income $ 560,000
(ii) Capital structure:
(a) Convertible 6% bonds. Each of the 300 $1,000 bonds is convertible into 50 shares of common stock at the present date and for the next 10 years. $ 300,000
(b) $10 par common stock, 200,000 shares issued and outstanding during the entire year. $2,000,000
(c) Stock options outstanding to buy 16,000 shares of common stock at $20 per share.
(iii) Other information:
(a) Bonds converted during the year NONE
(b) Income tax rate 30%
(c) Average market price per share of common stock during year $32
(d) Warrants were outstanding the entire year
(e) Warrants exercised during the year NONE
REQUIRED: (a) Is the capital structure simple or complex? Explain.
(b) Compute basic earnings per share.
(c) Compute diluted earnings per share.
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