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Pharoah Inc. has 1.05 million common shares outstanding as at January 1,2020. On June 30,2020,4% convertible bonds were converted into 115,000 additional shares. Up to that point, the bonds had paid interest of $590,000 after tax. Net income for the year was $1,299,962 During the year, the company issued the following: 1. June 30: 12,090 call options giving holders the right to purchase shares of the company for $34 2. Sept. 30: 17,090 put options allowing holders to sell shares of the company for $29 On February 1, Pharoah also purchased in the open market 12,090 call options on its own shares, allowing it to purchase its own shares for $31. Assume the average market price for the shares during the year was $39. Assume further the following: 1. On September 30,230,000 convertible preferred shares were redeemed. If they had been converted, these shares would have resulted in an additional 115,000 common shares being issued. The shares carried a dividend rate of $3 per share to be paid on September 30 . No conversions have ever occurred. 2. There are 11,800 of $1,000,5% convertible bonds outstanding with a conversion rate of three common shares for each bond starting January 1, 2021. Beginning January 1,2024 , the conversion rate is six common shares for each bond: and beginning January 1,2028 , it is nine common shares for each bond. The tax rate is 30%. Calculate the income effect of the dividends on preferred shares. $ Dividends on preferred shares