BU397 Lecture Notes - Lecture 14: Market Price, Shares Outstanding, Debenture
Document Summary
144,000: conversion always assumed to be at the beginning of the year. Interest (net of tax) on the convertible debt: dividends on the convertible preferred shares, the weighted average number of shares is increased by the additional common shares assumed issued (at the beginning of year) Interest on 6% debentures: ,000 x (1 - . 30, ,000 x (1 - . 30) x 9/12, adjusted net income. ,250: weighted average number of shares, add: shares assumed issued, 6% debentures, 10% debentures* 24,000: adjusted weighted average, number of shares, *32,000 shares x 9/12. 144,000: conversion is always assumed to be at the beginning of the year. Basic eps (,000 / 100,000) (,250 / 144,000) Incremental shares outstanding: dilution occurs because, on a net basis, more common shares are. 10,000 common shares: net income is ,000, 100,000 common shares outstanding, tax rate: 30, basic eps = . 10 per share, determine whether the convertible debt is dilutive, test#1, adjusted net income:
