Vaughn Horizon Corp had the following items, all of which were outstanding throughout the entire fiscal year ending September 30, 2024: ● ● 860,000 common shares 300,000 $3 cumulative, no-par value preferred shares Options to purchase 100,000 common shares at $12 per share. The average market price of Vaughn's common shares during the year was $20 per share. None of the options were exercised or expired during fiscal 2024. 9% bond with a face value of $1,900,000, convertible to 49,000 common shares. Vaughn's net income for fiscal 2024 was $7,694,000, and its tax rate was 15%. Preferred dividends had been paid in all previous fiscal years.
With the information provided answer the following questions.
a) Calculate the income effect of the dividends on the
b) Calculate the basic earnings per share (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately).(Round answer to 2 decimal places)
c) Calculate the after tax interest on bonds converted
d) Calculate an incremental per share effect for the 9% bonds. Do this by calculating the incremental numerator effect, incremental denominator effect and the EPS.
e) Calculate the proceeds from the assumed exercise of 100,000 options.
f) Calculate the incremental shares outstanding upon the exercise of options.
g) Rank the potentially dilutive securities from most dilutive to least dilutive. (9% bonds and Options)
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