Crane Corporation issued $3 million of 10-year, 7% callable convertible subordinated debentures on January 2, 2023. The debentures have a face value of $1,000, with interest payable annually. The current conversion ratio is 13:1, and in two years it will increase to 18:1. At the date of issue, the bonds were sold at 100 to yield a 7% effective interest rate. The bond discount is amortized using the effective interest method. Crane's effective tax rate was 35%. Net income in 2023 was $7.0 million, and the company had 2 million shares outstanding during the entire year. For simplicity, ignore the requirement to record the debentures' debt and equity components separately. (b) * Your answer is incorrect. Calculate diluted earnings per share for the year ended December 31, 2023. (Round answers to 2 decimal places, e.g. 15.25.) Diluted earnings per share $ 2.76
Crane Corporation issued $3 million of 10-year, 7% callable convertible subordinated debentures on January 2, 2023. The debentures have a face value of $1,000, with interest payable annually. The current conversion ratio is 13:1, and in two years it will increase to 18:1. At the date of issue, the bonds were sold at 100 to yield a 7% effective interest rate. The bond discount is amortized using the effective interest method. Crane's effective tax rate was 35%. Net income in 2023 was $7.0 million, and the company had 2 million shares outstanding during the entire year. For simplicity, ignore the requirement to record the debentures' debt and equity components separately. (b) * Your answer is incorrect. Calculate diluted earnings per share for the year ended December 31, 2023. (Round answers to 2 decimal places, e.g. 15.25.) Diluted earnings per share $ 2.76
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
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Transcribed Image Text:Crane Corporation issued $3 million of 10-year, 7% callable convertible subordinated debentures on January 2, 2023. The debentures
have a face value of $1,000, with interest payable annually. The current conversion ratio is 13:1, and in two years it will increase to
18:1. At the date of issue, the bonds were sold at 100 to yield a 7% effective interest rate. The bond discount is amortized using the
effective interest method. Crane's effective tax rate was 35%. Net income in 2023 was $7.0 million, and the company had 2 million
shares outstanding during the entire year. For simplicity, ignore the requirement to record the debentures' debt and equity
components separately.
(b)
* Your answer is incorrect.
Calculate diluted earnings per share for the year ended December 31, 2023. (Round answers to 2 decimal places, e.g. 15.25.)
Diluted earnings per share $
2.76
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