Question 1

As of the beginning of the year HalfPass Productions, Inc., had the following complex capital structure:

3,000,000 common shares outstanding. 175,000 options with an exercise price of $22. 250,000 warrants with an exercise price of $18.

During the year:

On March 1, the company issued 100,000 new shares of common stock. On July 1, the board of directors declared a 15% stock dividend. On September 1, the company repurchased 125,000 shares. Net income (after-tax) for the year was $7,500,000. The company paid common dividends of $2,750,000 and preferred dividends of $1,300,000. The average market price for the common stock was $25 per share.

Assume the fiscal year is January 1 through December 31. At year end, HalfPass's basic EPS is closest to:

A)$1.77.

B)$1.66.

C)$1.94.

Question 2

Given the following information about a firm:

Net Sales = $1,000. Cost of Goods Sold = $600. Operating Expenses = $200. Interest Expenses = $50. Tax Rate = 34%.

A)What are the gross and operating profit margins?

B)Gross Operating Margin: 40%; Operating Profit Margin: 20%

C)Gross Operating Margin: 40%; Operating Profit Margin: 10%

Gross Operating Margin: 20%; Operating Profit Margin: 15%