Chapter 8, Problem 8.3.2MBA

To determine

Concept Introduction:

Basic Earnings per share:

The Basic Earnings per share is the amount of net income earned by each common share outstanding. The Earnings per share calculated by with help of following formula:

  $\text{Basic Earnings per share=}\frac{\text{Net Income - Preferred Dividend}}{\text{Weighted Average Common Shares Outstanding}}$

  $\begin{array}{l} \hfill \\ NetIncomeavailabletocommonstockholder=Netincome–PreferredDividend\hfill \end{array}$

Bonds:

Bonds are debt instruments issued by the borrower company to its lenders. Bonds are issued at a specified rate of interest and for a specified time period. The bondholders get a fixed rate of interest on the bonds and repayment of the bonds at the maturity date. Bonds may be issued at a premium or discount.

To Indicate:

The effect of the interest payment on net assets and EPS