Business Finance Homework Help

Question discussed 2 and 4

The following information is taken from Sylvester Corporation’s financial statements at year end:

Bond Payable, 10%, convertible par value $500,000, net of discount$480,000

Bond Payable, 8%, convertible par value $100,000$100,000

Preferred A Shares, $2.50, cumulative, non-convertible; 20,000 shares outstanding$200,000

Preferred B Shares, $1.50, non-cumulative, convertible into common shares at the rate

of five common shares for each share preferred; 5,000 shares outstanding$50,000

Conversion Rights – Convertible Bond$150,000

Contributed Surplus – Stock Options$18,000

Common Shares, no par; 1,000,000 authorized, 670,000 issued and outstanding.$1,300,000

Income after tax from continuing operations$950,000

Income after tax from discontinued operations$14,000

Net Income$964,000

Additional information is as follows:

• No dividends were declared last year
• Total dividends declared this year were $600,000
• 10% Bonds, each $1,000 bond is convertible into 75 common shares.Interest expense on the bonds for the year was $57,600 including bond discount.
• 8% Bonds were issued at par on May 1; each $1,000 bond is convertible into 30 common shares.
• 28,000 options to purchase one common share per option at $4 per share were outstanding at the beginning of the year. On October 1, 8,000 options were exercised.The average market price of the common shares for the past year was $10.
• Common Shares activity was as follows: 450,000 shares outstanding on January 1; declared a 20% stock dividend on March 1; 120,000 additional shares issued for cash on July 1, Oct 1 8,000 options were exercised.
• The tax rate is 40%; and Sylvester has a Dec 31^st year end.

Required:

Calculate basic and fully diluted EPS. (Show all calculations and round to the nearest cent)