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Q3. Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2016:...

Q3. Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2016:

  Common shares outstanding throughout the year

100

million

  Convertible preferred shares (convertible into 25 million shares of common)

75

million

  Convertible 10% bonds (convertible into 15.0 million shares of common)

$

1,900

million

Henderson-Niles’ net income for the year ended December 31, 2016, is $820 million. The income tax rate is 40%. Henderson-Niles paid dividends of $2 per share on its preferred stock during 2016.

Required:

  1. Compute basic earnings per share for the year ended December 31, 2016.

820-150 = 670

100

Basic = 670/100= 6.7

  1. The incremental effect of the conversion of the preferred stock is:

  1. The incremental effect of the conversion of the bonds is:

4. Are convertible preferred stock or convertible bonds dilutive or antidilutive?

  1. Compute diluted earnings per share for the year ended December 31, 2016.

820+114 = 934

100-15-25=40

934/140 = 6.67

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