Diluted EPS The following information pertains to questions 23-27. You will need to scroll, so in advance lam telling you the questions about dilution tests that you will be asked so that you can make notes on your paper as you read through the information: - Options - numerator impact, denominator impact - Preferred Shares - numerator impact, denominator impact, dilutive? - 75% of bonds who did not convert - numerator impact, denominator impact Skywalker Company had the following debt and equity securities outstanding on January 1, 2021: Debt Bonds payable: 6%, maturing December 31, 2024, each $1,000 bond convertible into 20 common shares (issued at par value) $700.000 $740,000 $12,000 Equity Common shares: 200,000 shares outstanding, no-par value Preferred shares, $2 cumulative, convertible (each preferred share is convertible into three common shares), 5,000 shares outstanding Retained earnings Total shareholder's equity During 2021 the following transactions occurred: $3,100,000 $3,852,000 maman 1. On July 1, 202, 2596 of the convertible bonds were converted into common shares. 2. Options were issued January 2021 which give the holder the right to purchase 5.000 shares au 130 mer share the average market price of shares in 2021 was $40. and none of the options were exercised in 2021. 3. Net Income for 202 was 8560.000 (after tax). 4. The income tax rate is 35. 5. Basic EPS has been correctly calculated as $550,000/201,750 = $2.73/share, Calculated as: Numerator: ($560.000 - 10.000 - $550.000) / Denominator: 201.750 shares Question 22 (1 point) Listen Dilutive test: Options What is the impact on the numerator for the options? Do not input dollars, commas or decimals. If the answer is zero, input 0. A Question 23 (1.5 points) Listen Dilution test - options: What is the dilutive impact on the denominator of the options? Do not input dollars, commas or decimals. If the answer is zero, input O. 150.000 increase 3.750 increase 1,250 increase O increase 5,000 increase Question 24 (3 points) Listen Dilution test: Preferred Shares Blank #1 (top): What is the impact on the numerator for the convertible preferred shares? Do not input dollars, commas or decimals. If the answer is zero, input 0. Blank #2 (middle): What is the impact on the denominator of the convertible preferred shares? Do not input dollars, commas or decimals. If the answer is zero, input o Blank #3 (bottom): Are the convertible preferred shares dilutive? Input the word yes or no A/ Question 25 (2 points) Listen Dilution test: Convertible Bonds - 75% who did not convert What is the impact on the numerator for the convertible bonds? $31,500 increase $20.475 increase $15,356 increase $10,238 increase None of these Question 26 (2 points) Listen Dilution test: convertible Bonds - 75% who did not convert What is the impact on the denominator for the convertible bonds? 5,250 increase 7000 increase 700 increase 10,500 increase O 14,000 increase N The following are the results of the dilution tests for a company with a complex capital structure. Basic EPS are $3.50 per share. Rank the results in the order from most dilutive to least dilutive, using the options provided. 1. Most dilutive (will be included first in the cascading diluted EPS calculation) Options: Strike price is $15, average market price is $20 2. Second-most dilutive (will be included second in the cascading diluted EPS calculation) Convertible Bond B: Dilution Test result $4.01 3 Third-most dilutive (will be included third in the cascading diluted EPS calculation) Options: Strike price is $15, average market price is $12 4. Fourth-most dilutive (will be included fourth in the cascading diluted EPS calculation) Convertible Bond A: Dilution Test result $1.95 Convertible preferred share: Dilution Test result $2.40 5. Fifth-most dilutive (will be included fifth in the cascading diluted EPS calculation) Will not be included in diluted EPS 1. Most dilutive (will be included first in the cascading diluted EPS calculation) Options: Strike price is $15, average market price is $20 2. Second-most dilutive (will be included second in the cascading diluted EPS calculation)