3. M Inc. issued 2,000 convertible bonds in 2009 at a coupon rate of 8%and a par value of £1,000. Each bond is convertible into M's commonstock at £25 per share. M expected the stock price to rise rapidly afterthe convertible was issued and lead to a quick conversion of the bonddebt into equity. However, a recessionary climate has prevented thatfrom happening, and the bonds are still outstanding. In 2010M had netincome of £3 million. One million share of its stock were outstanding forthe entire year, and its marginal tax rate is 40%.Calculate M's basic and diluted EPS. (Diluted EPS assumes all convertiblebonds are converted at the beginning of the year)

Diluted EPS Diluted EPS is used to evaluate the quality of a company's earnings per share after all…

M Inc. issued 2,000 convertible bonds in 2009 at a coupol nd a par value of £1,000. Each bond is convertible into M's ock at £25 per share. M expected the stock price to rise ra e convertible was issued and lead to a quick conversion o ebt into equity. However, a recessionary climate has preve om happening, and the bonds are still outstanding. In 2010 come of £3 million. One million share of its stock were out e entire year, and its marginal tax rate is 40%.

M Inc. issued 2,000 convertible bonds in 2009 at a coupol nd a par value of £1,000. Each bond is convertible into M's ock at £25 per share. M expected the stock price to rise ra e convertible was issued and lead to a quick conversion o ebt into equity. However, a recessionary climate has preve om happening, and the bonds are still outstanding. In 2010 come of £3 million. One million share of its stock were out e entire year, and its marginal tax rate is 40%.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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