Peyton plans to raise $1,000,000 million of additional capital for the coming year. They anticipate...
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Peyton plans to raise $1,000,000 million of additional capital for the coming year. They anticipate that it will enable them to earn an additional $600,000 after tax. What would be the impact on earnings per share if the raise the $1,000,000 by:
a) issuing 10,000 share of 10% $100 par value convertible preferred stock, where share can be converted into 10 shares of Peyton common stock
b) issuing $1,000,000 of 8% convertible bond, each $1,000 bond can be converted into 5 shares of Peyton common stock
c) $500,000 of each of the above?
Net Income 12,363,732.51
Less: Preferred Dividends 50,000.00
Earnings Available to Common Shareholders 12,313,732.51
Common Shares Outstanding 1,750,000.00
Basic EPS 7.04
A. If all preferred shares are converted:
Net Income 12,363,732.51
Additional Common Shares ?
Common Shares Outstanding after conversion ?
EPS if preferred shares converted ?
Preferred shares are antidilutive ?
B. If all bonds are converted:
Net Income 12,363,732.51
Less: Preferred Dividends 50,000.00
Add back interest on bonds, net of income tax ?
Earnings Available to Common Shareholders ?
Additional Common Shares ?
Common Shares Outstanding after conversion ?
Answer & Explanation
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