Headland Inc. had 507,000 common shares outstanding for the entire fiscal year ended August 31, 2020. Headland has 102,000outstanding $2 cumulative, no-par value preferred shares. All shares were outstanding for the full year. Options were written at the start of the fiscal year to purchase 31,000 common shares at $16 per share. The average market price of Headland’s common shares during the year ended August 31, 2020 was $25 per share. The options expire in 2029, and none were actually exercised during the current year. Also outstanding for the entire year was a 6% bond with a face value of $6,600,000, convertible to 150,000 common shares. Headland Inc.’s net income for the year was $2,688,300, and the income tax rate for the fiscal year was 40%. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately).

a) Calculate the after-tax interest paid on the 6% bonds.

b) Calculate the proceeds from assumed exercise of 31,000 options.

c) Calculate the incremental shares oustanding upon the exercise of options.

d)Calculate Headland Inc.’s diluted earnings per share for the year ended August 31, 2020. (Round calculations of EPS to 3 decimal places, e.g. $3.545 and provide final answer to 2 decimal places, e.g. 15.25.)

		Numerator		Denominator		EPS
Basic EPS		$				$
6% bondsOptions
Sub Total						$
6% bondsOptions
Total		$				$

Diluted EPS

Answer rating: 100% (QA)

a b c Given data Income for 2018 6 Convertible Bonds No of shares Deb... View the full answer