PLEASE ANSWER QUESTION A PART 1 and 2 QUESTION B Part 1 and 2 and QUESTION C P a

Question

PLEASE ANSWER QUESTION A PART 1 and 2 QUESTION B Part 1 and 2 and QUESTION C Part 1

Pleae complete it on excel or copy paste it from excel

A.

ClassCo sells Convertible Bond with warrant to convert into stock

Bond with face

$1,000

Face Rate

8.00%

Term

3

Yrs.

Market rate @ sale

8.50%

issued:

6/30/2018

maturity

6/30/2021

Interest paid annually

Bond sold for

              996.00

Part 1) determine value received from sale, Discount or Premium?

Part 2) Prepare JE to record sale, use incremental

assume value of Bond in the known

and value of warrant is incremental

B.

ClassCo:

PE 12/31/2018

Fiscal = calendar Yr.

Net income: after tax

2000

shares:

Beginning:

505

3/1 issue

50

9/1 issue

60

Treasury Purchase 10/30

         (24)

on 11/22, 3 for 1 split

Preferred dividends this year =

250

Part 1) Calculate EPS

Part 2)   using "as if" compute EPS & dilutive effect of Convertible Bonds

issued 10 bonds , $1000 bonds issued prior yr., 6%, each bond was convertible into 30 shares

40% tax rate for bonds

C.

NET Income:

4500

No preferred stock

Average # of Shares

2200

EPS =

2.045

Stock Options:

all full Yr.

# option shares

500

0ption price per share

$18

Market at PE being measured

$32

Part 1

Compute dilutive effect per share

A.

ClassCo sells Convertible Bond with warrant to convert into stock

Bond with face

$1,000

Face Rate

8.00%

Term

3

Yrs.

Market rate @ sale

8.50%

issued:

6/30/2018

maturity

6/30/2021

Interest paid annually

Bond sold for

              996.00

Part 1) determine value received from sale, Discount or Premium?

Part 2) Prepare JE to record sale, use incremental

assume value of Bond in the known

and value of warrant is incremental

B.

ClassCo:

PE 12/31/2018

Fiscal = calendar Yr.

Net income: after tax

2000

shares:

Beginning:

505

3/1 issue

50

9/1 issue

60

Treasury Purchase 10/30

         (24)

on 11/22, 3 for 1 split

Preferred dividends this year =

250

Part 1) Calculate EPS

Part 2)   using "as if" compute EPS & dilutive effect of Convertible Bonds

issued 10 bonds , $1000 bonds issued prior yr., 6%, each bond was convertible into 30 shares

40% tax rate for bonds

C.

NET Income:

4500

No preferred stock

Average # of Shares

2200

EPS =

2.045

Stock Options:

all full Yr.

# option shares

500

0ption price per share

$18

Market at PE being measured

$32

Part 1

Compute dilutive effect per share

Explanation / Answer

Answer A : Part 1 Value to be received on bond Interest on bond 80 per annum market rate at sale 8.50% redemption value 1000 value of bond 80(pvaf@8.5%,3years)+1000(pvf@8.5%,3rd year) value of bond at 987.32 the end of 3rd year Actual value of bond on sale is 996 (greater then value of bond) , it means bond has been sold on premium Answer B : Part 1 Caluculation of no. of shares beginning 505 3/1 issue 50 9/1 issue 60 treasury purchase -24 591 on 11/22 , 3 for 1 split 1773 then total no. of share will be 1773 Caluclation of Income for equity shareholders Net Income 2000 Less: Prefrence Dividend 200 Income for equity shareholders 1800 No. of equity shareholders 1773 Earning per share 1.015228 Part 2: Interest on per bond 60 Interest On total Bond 60*10 600 Each bond convert in 30 shares Then no. of shares will be issue to bond holders 300 Calculation of EPS (assume that it is before interest) Net Income 2000 Less; Interest 600 Net income after interest 1400 Less:tax @ 40 % 560 Net income after interest & tax 840 Less: Prefrence Dividend 200 Earning for equity shareholders 640 no. of shares 1773 EPS 0.36097 Diluted earning per share Earning For equity shareholders 640 no. of diluted shares 2073 Diluted earning per share 0.308731 Answer A : Part 1 Value to be received on bond Interest on bond 80 per annum market rate at sale 8.50% redemption value 1000 value of bond 80(pvaf@8.5%,3years)+1000(pvf@8.5%,3rd year) value of bond at 987.32 the end of 3rd year Actual value of bond on sale is 996 (greater then value of bond) , it means bond has been sold on premium Answer B : Part 1 Caluculation of no. of shares beginning 505 3/1 issue 50 9/1 issue 60 treasury purchase -24 591 on 11/22 , 3 for 1 split 1773 then total no. of share will be 1773 Caluclation of Income for equity shareholders Net Income 2000 Less: Prefrence Dividend 200 Income for equity shareholders 1800 No. of equity shareholders 1773 Earning per share 1.015228 Part 2: Interest on per bond 60 Interest On total Bond 60*10 600 Each bond convert in 30 shares Then no. of shares will be issue to bond holders 300 Calculation of EPS (assume that it is before interest) Net Income 2000 Less; Interest 600 Net income after interest 1400 Less:tax @ 40 % 560 Net income after interest & tax 840 Less: Prefrence Dividend 200 Earning for equity shareholders 640 no. of shares 1773 EPS 0.36097 Diluted earning per share Earning For equity shareholders 640 no. of diluted shares 2073 Diluted earning per share 0.308731

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