Peyton plans to raise $1,000,000 million of additional capital for the coming year. They anticipate
that it will enable them to earn an additional $600,000 after tax. What would be the impact on
earnings per share if the raise the $1,000,000 by:
a) issuing 10,000 share of 10% $100 par value convertible preferred stock, where share
can be coverted into 10 shares of Peyton common stock?
b) issuing $1,000,000 of 8% convertible bond, each $1,000 bond can be converted into?
5 shares of Peyton common stock?
c) $500,000 of each of the above?
Net Income
Less: Preferred Dividends
Earnings Available to Common Shareholders
Common Shares Outstanding
	Basic EPS
If all preferred shares are converted:
Net Income
Additional Common Shares
Common Shares Outstanding after conversion
EPS if preferred shares converted
	Preferred shares are antidilutive
If all bonds are converted:
Net Income
Less: Preferred Dividends
Add back interest on bonds, net of income tax
Earnings Available to Common Shareholders
Additional Common Shares
Common Shares Outstanding after conversion