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E16-25B (EPS with Convertible Bonds and Preferred Stock)On January 1, 2014, Yellow Car Company issued 15-year, $50,000,000 face value, 4% bonds, at par. Each $1,000 bond is convertible into 20 shares of Yellow Car common stock. None of the bonds were conv

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E16-25B (EPS with Convertible Bonds and Preferred Stock)On January 1, 2014, Yellow Car Company issued 15-year, $50,000,000 face value, 4% bonds, at par. Each $1,000 bond is convertible into 20 shares of Yellow Car common stock. None of the bonds were converted in 2014. Yellow Car?s net income in 2014 was $8,680,000, and its tax rate was 30%. The company had 2,650,000 shares of common stock issued and outstanding throughout 2014.;Instructions;(a) Compute diluted earnings per share for 2014.;(b) Compute diluted earnings per share for 2014, assuming the same facts as above, except that $50,000,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 2 shares of Yellow Car common stock.

 

Paper#78510 | Written in 18-Jul-2015

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