Question: The financial data below should be used to answer the

The financial data below should be used to answer the following two questions.

WRESTLING FEDERATION OF AMERICA, INC.
Capital Structure and Earnings for Year 7
Number of common shares outstanding on December 31, Year 7. . . . . . . . . . . . . . . 2,700,000
Number of common shares outstanding during Year 7 (weighted average) . . . . . . . 2,500,000
Market price per common share on December 31, Year 7 . . . . . . . . . . . . . . . . . . . . . $ 25
Weighted-average market price per share during Year 7 . . . . . . . . . . . . . . . . . . . . . $ 20
Options outstanding during Year 7:
Number of shares issuable on exercise of options . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Exercise price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15
Convertible bonds outstanding (December 31, Year 3, issue date):
Number of convertible bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Shares of common issuable on conversion (per bond) . . . . . . . . . . . . . . . . . . . . . 10
Coupon rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0%
Proceeds per bond at issue (at par value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000
Net income for Year 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,500,000
Tax rate for Year 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.0%
1. Basic earnings per share for Year 7 is (choose one of the following):
a. $2.41
c. $2.60
b. $2.57
d. $2.50
2. Diluted earnings per share for Year 7 is (choose one of the following):
a. $2.43
c. $2.54
b. $2.55
d. $2.60



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  • CreatedJanuary 22, 2015
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