Northrop Grumman Corporation reports the following in footnote 4 to its 2008 10-K related to its convertible preferred stock. Conversion of Preferred Stock-On February 20, 2008, the company's board of directors approved the redemption of the 3.5 million shares of mandatorily redeemable convertible preferred stock on April 4, 2008. Prior to the redemption date, substantially all of the preferred shares were converted into common stock at the election of shareholders. All remaining unconverted preferred shares were redeemed by the company on the redemption date. As a result of the conversion and redemption, the company issued approximately 6.4 million shares of common stock.

REQUIRED

a. What do you believe is meant by the terms "mandatorily redeemable" prior to the words ''preferred stock"?

b. Northrop's balance sheet at December 31, 2007. shows preferred stock of $350 million and $0 million on December 31, 2008. Northrop originally sold the preferred shares at par. What was the preferred par value per share?

c. The fair market value of a preferred share, as reported by Northrop on December 31, 2008. was $146. What could account for the substantial increase in the value per share?

d. How should preferred stock be treated in an analysis of a company?

e. Discuss the general effects of the April 4th conversion on Northrop Grumman's balance sheet.