Pharoah Inc. has 0.90 million common shares outstanding as at January 1, 2020. On June 30, 2020, 4% convertible bonds we
Posted: Sun Jul 03, 2022 1:31 pm
Pharoah Inc. has 0.90 million common sharesoutstanding as at January 1, 2020. On June 30, 2020, 4% convertiblebonds were converted into 110,000 additional shares. Upto that point, the bonds had paid interest of $900,000 aftertax. Net income for the year was $1,299,146. During the year, thecompany issued the following:
On February 1, Pharoah also purchased in the openmarket 14,430 call options on its own shares, allowing itto purchase its own shares for $31. Assume the average market pricefor the shares during the year was $39.Assume further the following:
On September 30, 220,000 convertible preferred shareswere redeemed. If they had been converted, these shares would haveresulted in an additional 110,000 common shares beingissued. The shares carried a dividend rate of $3 per share tobe paid on September 30. No conversions have ever occurred.
There are 10,000 of $1,000, 9% convertible bondsoutstanding with a conversion rate of three common shares for eachbond starting January 1, 2021. Beginning January 1, 2024, theconversion rate is six common shares for each bond; and beginningJanuary 1, 2028, it is nine common shares for each bond. The taxrate is 30%.
(a1)
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Your answer is correct.
Calculate weighted common shares outstanding.
eTextbook and Media
Attempts: 1 of 5 used
(a2)
Incorrect answer icon
Your answer is incorrect.
Calculate the income effect of the dividends on preferredshares
On February 1, Pharoah also purchased in the openmarket 14,430 call options on its own shares, allowing itto purchase its own shares for $31. Assume the average market pricefor the shares during the year was $39.Assume further the following:
On September 30, 220,000 convertible preferred shareswere redeemed. If they had been converted, these shares would haveresulted in an additional 110,000 common shares beingissued. The shares carried a dividend rate of $3 per share tobe paid on September 30. No conversions have ever occurred.
There are 10,000 of $1,000, 9% convertible bondsoutstanding with a conversion rate of three common shares for eachbond starting January 1, 2021. Beginning January 1, 2024, theconversion rate is six common shares for each bond; and beginningJanuary 1, 2028, it is nine common shares for each bond. The taxrate is 30%.
(a1)
Correct answer icon
Your answer is correct.
Calculate weighted common shares outstanding.
eTextbook and Media
Attempts: 1 of 5 used
(a2)
Incorrect answer icon
Your answer is incorrect.
Calculate the income effect of the dividends on preferredshares