Talisman Energy Inc., headquartered in Calgary, is a large international oil and gas producer. Talisman's authorized share capital includes an unlimited number of common shares and an unlimited number of two classes of preferred shares.
On December 5, 2011, Talisman issued 8 million cumulative redeemable Series 1 preferred shares at a price of $25 per share. The following information is also available for the years ended December 31, 2010 and 2011:

Instructions
(a) Discuss the change in Talisman's profitability from 2010 to 2011.
(b) Is your assessment in (a) consistent with the change in market price per share? Explain.
(c) Talisman did not issue any common shares in 2011. Why might it have issued preferred shares instead?
(d) Total gross proceeds from the preferred share issue were $200 million ($25 8 million). However, Talisman credited its Preferred Share account $191 million because of underwriting fees of $9 million. Why is this fee recorded as a reduction of proceeds from the issue of shares as opposed to an expense?
(e) The preferred shareholders are entitled to receive a dividend of 4.2%. What is this in dollars per share? Why is this rate higher than the interest rate on savings accounts paid by banks?
(f) The preferred shares are redeemable for $25 per share (plus unpaid dividends) on December 31, 2016, and on December 31 every five years thereafter. Why might Talisman choose to redeem the shares?

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Profit margin Asset turnover Return on assets Return on equity Common share market price per Preferred share market price per share 2011 9.4% 0.36 times 3.4% 8.1% $12.98 $24.34 2010 28.1% 0.33 times 4.5% 10.5% $22.12 Not applicable share