During all of 2018 Dawson Manufacturing Company had 950,000 shares of common stock outstanding. On June 30, 2018, the company issued 10,000 7 percent convertible bonds at par. The maturity value of each bond is $1,000. Each bond is convertible into 20 shares of common stock. None were converted during 2018. Dawson also had 60,000 stock warrants outstanding for all of 2018. The option price is $10 per share. The market price of the common stock was $40 on December 31, 2018, and the average market price for 2018 was $30. Dawson reported a net income of $3,650,000 for 2018. Assume the company had a 40 percent income tax rate. (a) Compute the basic earnings per share. (b) Compute diluted earnings per share (ignore the order of incremental dilutive effect). Show your works. (c) In addition to the above capital structure, assume that Dawson issued 28,000 shares of $100 par, 10% cumulative preferred stock, par $100, sold at 110 on Jan. 1, 2018. Each share of preferred stock is convertible into 1 share of common stock. Compute diluted earnings per share (ignore the order of incremental dilutive effect). Show your works.
During all of 2018 Dawson Manufacturing Company had 950,000 shares of common stock outstanding. On June 30, 2018, the company issued 10,000 7 percent convertible bonds at par. The maturity
Dawson also had 60,000 stock warrants outstanding for all of 2018. The option price is $10 per share. The market price of the common stock was $40 on December 31, 2018, and the average market price for 2018 was $30. Dawson reported a net income of $3,650,000 for 2018. Assume the company had a 40 percent income tax rate.
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(a) |
Compute the basic earnings per share.
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(b) |
Compute diluted earnings per share (ignore the order of incremental dilutive effect). Show your works. |
(c) In addition to the above capital structure, assume that Dawson issued 28,000 shares of $100 par, 10% cumulative
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