MacAfee Corporation has basic earnings per Class A common share of$ 2.61. MacAfee has a tax...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
MacAfee Corporation has basic earnings per Class A common share of$ 2.61. MacAfee has a tax rate of 25%. The average share price during the year was$ 42. Review each of the following items: a. Class B nonvoting cumulative$ 1 shares, 75,000 shares outstanding all year, convertible into Class A shares at the rate of four Class B shares for one Class A share. Dividends of $0.50 were declared this year and basic EPS properly reflects the dividend entitlement of these preferred shares. b. Class A common stock options outstanding all year for 30,000 shares at a price of$ 65. c. Class A common stock options outstanding all year for 30,000 shares at a price of$ 35. d. Class A common stock options granted at the end of the fiscal year for 10,000 shares at $ 32 per share. e. 12%, eight-year$ 5,000,000 convertible bonds outstanding all year, convertible into 18 Class A common shares for every$ 1,000 bond. A bond discount was recorded when the bond was originally issued and amortization of$ 43,750 was recorded on the discount this year. On issuance,$ 420,000 of common stock conversion rights were recorded in shareholders' equity. Page 1240 f. 8%, 15-year, $9,000,000 convertible bonds outstanding all year, convertible into 24 Class A common shares for every$ 1,000 bond. A bond discount was recorded on issuance, and amortization of$ 19,200 was recorded on the discount this year. On issuance,$ 145,000 of common stock conversion rights were recorded in shareholders' equity. Required: Indicate whether each of the above items would be included or excluded in a calculation of diluted EPS, and why. The solution should include the individual effect of each item, as applicable. If the item is included, indicate the change to the numerator and denominator of diluted EPS. MacAfee Corporation has basic earnings per Class A common share of$ 2.61. MacAfee has a tax rate of 25%. The average share price during the year was$ 42. Review each of the following items: a. Class B nonvoting cumulative$ 1 shares, 75,000 shares outstanding all year, convertible into Class A shares at the rate of four Class B shares for one Class A share. Dividends of $0.50 were declared this year and basic EPS properly reflects the dividend entitlement of these preferred shares. b. Class A common stock options outstanding all year for 30,000 shares at a price of$ 65. c. Class A common stock options outstanding all year for 30,000 shares at a price of$ 35. d. Class A common stock options granted at the end of the fiscal year for 10,000 shares at $ 32 per share. e. 12%, eight-year$ 5,000,000 convertible bonds outstanding all year, convertible into 18 Class A common shares for every$ 1,000 bond. A bond discount was recorded when the bond was originally issued and amortization of$ 43,750 was recorded on the discount this year. On issuance,$ 420,000 of common stock conversion rights were recorded in shareholders' equity. Page 1240 f. 8%, 15-year, $9,000,000 convertible bonds outstanding all year, convertible into 24 Class A common shares for every$ 1,000 bond. A bond discount was recorded on issuance, and amortization of$ 19,200 was recorded on the discount this year. On issuance,$ 145,000 of common stock conversion rights were recorded in shareholders' equity. Required: Indicate whether each of the above items would be included or excluded in a calculation of diluted EPS, and why. The solution should include the individual effect of each item, as applicable. If the item is included, indicate the change to the numerator and denominator of diluted EPS.
Expert Answer:
Answer rating: 100% (QA)
a The Class B nonvoting cumulative 1 shares would be included in a calculation of diluted EPS The nu... View the full answer
Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
Posted Date:
Students also viewed these accounting questions
-
Bonds and preferred stock that are convertible into common stock are said to provide investors with both upside potential and downside protection. Explain how one security can possess both...
-
QI. (a) (b) (c) = dy d'y For x + y = 4, approximate and at x 1 using the Central Difference dx dx formula with step size 0.1. Perform three steps of False Position Method to approximate the root of...
-
1. (2 points) Prove or disprove that the sum of any even integer and any odd integer is odd.
-
Rosa's employer has instituted a flexible benefits program. Rosa will use the plan to pay for her daughter's dental expenses and other medical expenses that are not covered by health insurance. Rosa...
-
What are some problems with measuring social media (e.g., what does a like on Facebook really mean?)?
-
Mr. and Mrs. Poe earned $115,900 compensation income and $963 interest this year and recognized a $600 short-term capital gain and a $7,200 long-term capital gain on the sale of securities. They...
-
During a night shift, a nurse uses the patient administration system to conduct the administrative patient admission. The nurse then uses the NMDS to plan nursing care. Now consider the types of...
-
Condensed balance sheet and income statement data for Jergan Corporation are presented here. Additional information 1. The market price of Jergan's common stock was $7.00, $7.50, and $8.50 for 2015,...
-
What were net sales (remember to adjust the amounts in the statements as needed - some are in thousands, some in millions)? The Net Sales for the year of 2023 is $298,085,000,000 The Net Sales for...
-
Consider the deterministic world below (part (a)). Allowable moves are shown by arrows, and the numbers indicate the reward for performing each action. If there is no number, the reward is zero....
-
Consider a gas that obeys Bose-Einstein statistics, at a temperature below the Bose-Einstein condensation temperature TBE.
-
Consider the Nyquist diagram for given \(\mathrm{KG}(s) \mathrm{H}(s)\). The transfer function \(\mathrm{KG}(s) \mathrm{H}(s)\) has no poles and zeros in the right half of \(s\) plane. If the \((-1,...
-
Consider the following statements associated with phase and gain margins. 1. They are a measure of closeness of the polar plot to the \(-1+j 0\) point. 2. For a non-minimum phase to be stable it must...
-
The phase angle of the system \(G(s)=\frac{s+5}{s^{2}+4 s+9}\) varies between (a) \(0^{\circ}\) and \(90^{\circ}\) (b) \(0^{\circ}\) and \(-90^{\circ}\) (c) \(0^{\circ}\) and \(-180^{\circ}\) (d)...
-
Consider the following Nyquist plots of different control systems. The plot of unstable system is: (a) (c) 8 Imaginary 0 Real Imaginary 0 Real (b) (d) Imaginary 0 0 Real Imaginary Real
-
The amplitude ratio and phase shift function for a transmittance are \[ A(\omega)=4 \quad \phi(\omega)=-3 \omega(\mathrm{rad}) \] The forced sinusoidal response to the input signal \(r(t)=10 \cos...
-
! Required information Problem 8-6A (Algo) Disposal of plant assets LO C1, P1, P2 [The following information applies to the questions displayed below.] Onslow Company purchased a used machine for...
-
Distinguish between the work performed by public accountants and the work performed by accountants in commerce and industry and in not-for-profit organisations.
-
Melissa Simmons is the chief investment officer of a hedge fund specializing in options trading. She is currently back-testing various option trading strategies that will allow her to profit from...
-
Discuss the difficulties that having options in a security portfolio create for the measurement of portfolio risk. Specifically, explain why standard deviation is a deficient statistic for capturing...
-
Would you expect a steel company or a retail food chain to have greater business risk? Discuss this expectation in terms of the components of business risk.
-
Explain how objects interact by exchanging messages.
-
Describe the relationship between dynamic modeling, behavioral modeling, and structural modeling.
-
Comment on this statement: Dynamic modeling is about interaction.
Study smarter with the SolutionInn App