PLEASE ANSWER ALL PARTS
E8-49. Analyzing Convertible Preferred Stock Xerox Corp. reports the following stockholders' equity information in its 10-K report. December 31 Shareholders' Equity (in millions, except par value) 2018 2017 Series A convertible preferred stock. $ 214 $ 214 Common stock, $1 par value Additional paid-in capital. Treasury stock, at cost Retained earnings Accumulated other comprehensive loss. Xerox shareholders' equity. . 232 3,321 (55) 5,072 (3,565) 255 3,893 0 4,856 (3,748) $5,256 $5,005 Preferred Stock As of December 31, 2018 , we had one class of preferred stock outstanding. We have issued 180,000 shares of Series B Convertible Perpetual Preferred Stock that have an aggregate liquidation value of $180 and a carrying value of $214. The Series B Convertible Preferred Stock pays quarterly cash dividends at a rate of 8% per year. Each share of Preferred Stock is convertible at any time, at the option of the holder, into 37.4532 shares of common stock for a total of 6,742 thousand shares (reflecting an initial conversion price of approximately $26.70 per share of common stock), sub- ject to customary anti-dilution adjustments. Required a. At December 31, 2018, Xerox reports $214 million of 8% Series B Convertible Preferred stock. What is the dollar amount of dividends that Xerox must pay on this stock (assume a par value of $1,000 per share)? b. Describe the effects that will occur to Xerox's balance sheet and its income statement when the Con- vertible Preferred stock is converted. c. What is the benefit, if any, of issuing equity securities with a conversion feature? How are these se- curities treated in the computation of earnings per share (EPS)? E8-49. Analyzing Convertible Preferred Stock Xerox Corp. reports the following stockholders' equity information in its 10-K report. December 31 Shareholders' Equity (in millions, except par value) 2018 2017 Series A convertible preferred stock. $ 214 $ 214 Common stock, $1 par value Additional paid-in capital. Treasury stock, at cost Retained earnings Accumulated other comprehensive loss. Xerox shareholders' equity. . 232 3,321 (55) 5,072 (3,565) 255 3,893 0 4,856 (3,748) $5,256 $5,005 Preferred Stock As of December 31, 2018 , we had one class of preferred stock outstanding. We have issued 180,000 shares of Series B Convertible Perpetual Preferred Stock that have an aggregate liquidation value of $180 and a carrying value of $214. The Series B Convertible Preferred Stock pays quarterly cash dividends at a rate of 8% per year. Each share of Preferred Stock is convertible at any time, at the option of the holder, into 37.4532 shares of common stock for a total of 6,742 thousand shares (reflecting an initial conversion price of approximately $26.70 per share of common stock), sub- ject to customary anti-dilution adjustments. Required a. At December 31, 2018, Xerox reports $214 million of 8% Series B Convertible Preferred stock. What is the dollar amount of dividends that Xerox must pay on this stock (assume a par value of $1,000 per share)? b. Describe the effects that will occur to Xerox's balance sheet and its income statement when the Con- vertible Preferred stock is converted. c. What is the benefit, if any, of issuing equity securities with a conversion feature? How are these se- curities treated in the computation of earnings per share (EPS)
