In-class exercise 19-3 Diluted EPS In order to calculate EPS for the current year, Ajax Corporation has collected the following information about its common stock: Outstanding shares - beginning of the year (January 1) Additional shares issued on April 1 15% stock dividend declared and distributed on July 1 Shares reacquired on October 1 Net income for the year Dividends declared and paid for noncumulative, nonconvertible preferred stock 1,000,000 200,000 100,000 $3,000,000 $200,000 a) Calculate Ajax's basic EPS. b) Ajax's capital structure includes convertible bonds with a face value of $4,000,000 (issued at par) that pay 5% annual interest. These bonds are convertible into 500,000 common shares. Ajax's effective tax rate is 20%. Ajax has determined that the convertible bonds are dilutive. Calculate Ajax's diluted EPS.
In-class exercise 19-3 Diluted EPS In order to calculate EPS for the current year, Ajax Corporation has collected the following information about its common stock: Outstanding shares - beginning of the year (January 1) Additional shares issued on April 1 15% stock dividend declared and distributed on July 1 Shares reacquired on October 1 Net income for the year Dividends declared and paid for noncumulative, nonconvertible preferred stock 1,000,000 200,000 100,000 $3,000,000 $200,000 a) Calculate Ajax's basic EPS. b) Ajax's capital structure includes convertible bonds with a face value of $4,000,000 (issued at par) that pay 5% annual interest. These bonds are convertible into 500,000 common shares. Ajax's effective tax rate is 20%. Ajax has determined that the convertible bonds are dilutive. Calculate Ajax's diluted EPS.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![In-class exercise 19-3 Diluted EPS
In order to calculate EPS for the current year, Ajax Corporation has collected the following
information about its common stock:
Outstanding shares - beginning of the year (January 1)
Additional shares issued on April 1
15% stock dividend declared and distributed on July 1
Shares reacquired on October 1
Net income for the year
Dividends declared and paid for noncumulative, nonconvertible preferred stock
1,000,000
200,000
100,000
$3,000,000
$200,000
a) Calculate Ajax's basic EPS.
b) Ajax's capital structure includes convertible bonds with a face value of $4,000,000 (issued at
par) that pay 5% annual interest. These bonds are convertible into 500,000 common shares.
Ajax's effective tax rate is 20%. Ajax has determined that the convertible bonds are dilutive.
Calculate Ajax's diluted EPS.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe30b0570-2e45-4cc7-b7ed-30565f464118%2F78399eee-0f46-497e-a3ab-01d0abd5ed18%2F66vudup_processed.jpeg&w=3840&q=75)
Transcribed Image Text:In-class exercise 19-3 Diluted EPS
In order to calculate EPS for the current year, Ajax Corporation has collected the following
information about its common stock:
Outstanding shares - beginning of the year (January 1)
Additional shares issued on April 1
15% stock dividend declared and distributed on July 1
Shares reacquired on October 1
Net income for the year
Dividends declared and paid for noncumulative, nonconvertible preferred stock
1,000,000
200,000
100,000
$3,000,000
$200,000
a) Calculate Ajax's basic EPS.
b) Ajax's capital structure includes convertible bonds with a face value of $4,000,000 (issued at
par) that pay 5% annual interest. These bonds are convertible into 500,000 common shares.
Ajax's effective tax rate is 20%. Ajax has determined that the convertible bonds are dilutive.
Calculate Ajax's diluted EPS.
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