Question 2:During 20X6, ZZZ reported net income of $115,600 and had 200,000shares of common stock outstanding for the entire year. ZZZ had 1,000shares of 10%, $100 par convertible preferred stock, convertible into 40shares each, outstanding for the entire year. ZZZ also had 600, 7%, $1,000par value convertible bonds, convertible into 100 shares each, outstandingfor the entire year. Finally, ZZZ had 10,000 stock options outstandingduring the year. Each option is convertible into one share of stock at $15per share. The average market price of the stock for the year was $20.(Assume a 40% tax rate.)i. Compute the 20X6 basic earnings per share [4]ii. Calculate the 20X6 diluted EPS. [6]

earning before interest and tax (EBIT) =$115600 tax rate = 40% shares outstanding = 200000…

Answered: Question 2: During 20X6, ZZZ reported…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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1. Rahman Company began 2022 with 690,000 shares of common stock outstanding. On September 1, 2022 there was a 2 for 1 stock split. On November 1, 2022, the company repurchased 270,000 shares of treasury stock. 2. Net Income for 2022 was $18,990,000 and the corporate tax rate is 25%. 3. 4% convertible preferred stock was outstanding all year. Each share has a par value of $100 and the total par value is $18,000,000. Each preferred share is convertible into 3 shares of common stock. 4. In 2015, 8% bonds (maturing in 10 years) were issued at 98. The discount is being amortized on a straight-line basis. The bonds have a $1,000 par value each for a total par value of $12,000,000. Each bond is convertible into 2 shares of common stock. 5. On March 1, 2022, Rahman had a second issuance of convertible bonds at their stated rate of 9%. Each $1,000 bond is convertible into 6 shares of common stock. The total par is $15,000,000. 6.…
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