Question
Headland Inc. had 507,000 common shares outstanding for the entire fiscal year ended August 31, 2020. Headland has 102,000outstanding $2 cumulative, no-par value preferred shares.
Headland Inc. had 507,000 common shares outstanding for the entire fiscal year ended August 31, 2020. Headland has 102,000outstanding $2 cumulative, no-par value preferred shares. All shares were outstanding for the full year. Options were written at the start of the fiscal year to purchase 31,000 common shares at $16 per share. The average market price of Headlands common shares during the year ended August 31, 2020 was $25 per share. The options expire in 2029, and none were actually exercised during the current year. Also outstanding for the entire year was a 6% bond with a face value of $6,600,000, convertible to 150,000 common shares. Headland Inc.s net income for the year was $2,688,300, and the income tax rate for the fiscal year was 40%. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately).
a) Calculate the after-tax interest paid on the 6% bonds.
b) Calculate the proceeds from assumed exercise of 31,000 options.
c) Calculate the incremental shares oustanding upon the exercise of options.
d)Calculate Headland Inc.s diluted earnings per share for the year ended August 31, 2020. (Round calculations of EPS to 3 decimal places, e.g. $3.545 and provide final answer to 2 decimal places, e.g. 15.25.)
Numerator | Denominator | EPS | |||||
Basic EPS | $ | $ | |||||
6% bondsOptions | |||||||
Sub Total | $ | ||||||
6% bondsOptions | |||||||
Total | $ | $ |
Diluted EPS | ||
.............................
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started