Assume company Z issued 1,000 call stock options at the beginning of year 2021; the exercise price is $20. The Basic EPS = $2.5 = 25,000/10,000 (with a net income of $25,000 and WACS of 10,000). Th average share price equals $30 currently. The diluted eps is: O a. 2.419 O b. 2.5 O c. 2.403 O d. 2.7 Oe. None of the above Refer to Q17. In addition to the stock option, the company issued 100 convertible bonds sold at par at the beginning of the year. Each bond is valued at $100 and gives the bondholder the right to convert ear bond to 1 common shares. Coupon rate is 5% and the tax rate 30%. The diluted eps is O a. 2.5 O b. 2.419 O c. 2.403 O d. 2.7 O e. 2.65 Refer to Q17 and Q18. Assume that that the bonds were issued at par on June 30, 2021 with a 1% coupon rate instead of 5%. What would be the diluted EPS for company Z? O a. 2.419 O b. 2.5 O c. 2.403 O d. 1.929 O e. None of the above

Assume company Z issued 1,000 call stock options at the beginning of year 2021; the exercise price is $20. The Basic EPS = $2.5 = 25,000/10,000 (with a net income of $25,000 and WACS of 10,000). Th average share price equals $30 currently. The diluted eps is: O a. 2.419 O b. 2.5 O c. 2.403 O d. 2.7 Oe. None of the above Refer to Q17. In addition to the stock option, the company issued 100 convertible bonds sold at par at the beginning of the year. Each bond is valued at $100 and gives the bondholder the right to convert ear bond to 1 common shares. Coupon rate is 5% and the tax rate 30%. The diluted eps is O a. 2.5 O b. 2.419 O c. 2.403 O d. 2.7 O e. 2.65 Refer to Q17 and Q18. Assume that that the bonds were issued at par on June 30, 2021 with a 1% coupon rate instead of 5%. What would be the diluted EPS for company Z? O a. 2.419 O b. 2.5 O c. 2.403 O d. 1.929 O e. None of the above

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 5MC

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CALCULATING THE WACC Here is the condensed 2019 balance sheet for Skye Computer Company (in thousands of dollars): Skyes earnings per share last year were 3.20. The common stock sells for 55.00. last years dividend (D0) was 2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skyes preferred stock pays a dividend of 3.30 per share, and its preferred stock sells for 30.00 per share. The firms before-lax cost of debt is 10%, and its marginal tax rate is 25%. The firms currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skyes beta is 1.516. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals 1.2 million. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity. b. Now calculate the cost of common equity from retained earnings, using the CAPM method. c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between r1 and rs as determined by the DCF method, and add that differential to the CAPM value for rs.) d. If Skye continues to use the same market-value capital structure, what is the firms WACC assuming that (1) it uses only retained earnings for equity and (2) if it expands so rapidly that it must issue new common stock?
Begin with the partial model in the file Ch02 P21 Build a Model.xlsx on the textbooks Web site. a. Using the financial statements shown here for Lan Chen Technologies, calculate net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, and return on invested capital for 2020. The federal-plus-state tax rate is 25%. b. Assume there were 15 million shares outstanding at the end of 2019, the year-end closing stock price was 65 per share, and the after-tax cost of capital was 10%. Calculate EVA and MVA for 2020. Lan Chen Technologies: Income Statements for Year Ending December 31 (Millions of Dollars) Lan Chen Technologies: December 31 Balance Sheets (Thousands of Dollars)
Hyde Corporations capital structure at December 31, 2018, was as follows: On July 2, 2019, Hyde issued a 10% stock dividend on its common stock and paid a cash dividend of 2.00 per share on its preferred stock. Net income for the year ended December 31, 2019, was 780,000. What should be Hydes 2019 basic earnings per share? a. 7.80 b. 7.09 c. 7.68 d. 6.73
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Cash Dividends on Common and Preferred Stock Lemon Inc. has the following information regarding its preferred and common stock: Preferred stock, S30 par, 12% cumulative; 300,000 shares authorized; 150,000 shares issued and outstanding Common stock, $2 par; 2,500,000 shares authorized; 1,200,000 shares issued; 1,000,000 outstanding As of December 31, 2019, Lemon was 3 years in arrears on its dividends. During 2020, Lemon declared and paid dividends. As a result, the common stockholders received dividends of $0.45 per share. Required: What was the total amount of dividends declared and paid? What journal entry was made at the date of declaration?
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Statement of Stockholders' Equity At the end of 2019, Stanley Utilities Inc. had the following equity accounts and balances: During 2020, Stanley Utilities engaged in the following transactions involving its equity accounts: Sold 3,300 shares of common stock for $15 per share. Sold 1,000 shares of 12%, $100 par preferred stock at $105 per share. Declared and paid cash dividends of $8,000. Repurchased 1,000 shares of treasury stock (common) for $38 per share. Sold 400 of the treasury shares for $42 per share. Required: Prepare the journal entries for Transactions a through e. Assume that 2020 net income was $87,000. Prepare a statement of stockholders equity at December 31, 2020.
Statement of Stockholders' Equity At the end of 2019, Stanley Utilities Inc. had the following equity accounts and balances: During 2020, Haley engaged in the following transactions involving its equity accounts: Sold 5,000 shares of common stock for $19 per share. Sold 1.200 shares of 12%, $50 par preferred stock at $75 per share. Declared and paid cash dividends of $22,000. Repurchased 1,000 shares of treasury stock (common) for $24 per share. Sold 300 of the treasury shares for $26 per share. Required: Prepare the journal entries for Transactions a through e. Assume that 2020 net income was $123,700. Prepare a statement of stockholders equity at December 31, 2020.
Venzuela Company's net income for 2020 is $50,000. The only potentially dilutive securities outstanding were 1,000 options issued during 2019, each exercisable for one share at $6. None has been exercised, and 10,000 shares of common were outstanding during 2020. The average market price of Venzuela's stock during 2020 was $20. Instructions a. Compute diluted earnings per share. (Round to nearest cent.) b. Assume the same facts as those assumed for part (a), except that the 1,000 options were issued on October 1, 2020 (rather than in 2019). The average market price during the last 3 months of 2020 was $20.
XYZ stock price and dividend history are as follows: Year Beginning-of-Year Price Dividend Paid at Year-End 2018 $ 130 $ 2 2019 153 2 2020 128 2 2021 133 2 An investor buys five shares of XYZ at the beginning of 2018, buys another two shares at the beginning of 2019, sells one share at the beginning of 2020, and sells all six remaining shares at the beginning of 2021. Required: a. What are the arithmetic and geometric average time-weighted rates of return for the investor? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b-1. Prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2018, to January 1, 2021. (Negative amounts should be indicated by a minus sign.) b-2. What is the dollar-weighted rate of return? (Hint: If your calculator cannot calculate internal rate of return, you will have to use a spreadsheet or trial and error.) (Negative value should be indicated by a minus…
Windsor Company’s net income for 2020 is $51,500. The only potentially dilutive securities outstanding were 900 options issued during 2019, each exercisable for one share at $6. None has been exercised, and 10,700 shares of common were outstanding during 2020. The average market price of Windsor’s stock during 2020 was $18.(a) Compute diluted earnings per share. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share $ (b) Assume the same facts as those assumed for part (a), except that the 900 options were issued on October 1, 2020 (rather than in 2019). The average market price during the last 3 months of 2020 was $18. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share $
XYZ stock price and dividend history are as follows: Year Beginning-of-Year Price Dividend Paid at Year-End 2018 $ 110 $ 3 2019 113 3 2020 100 3 2021 105 3 An investor buys four shares of XYZ at the beginning of 2018, buys another two shares at the beginning of 2019, sells one share at the beginning of 2020, and sells all five remaining shares at the beginning of 2021. Required: a. What are the arithmetic and geometric average time-weighted rates of return for the investor? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b-1. Prepare a chart of cash flows for the four dates corresponding to the turns of the year for January 1, 2018, to January 1, 2021. (Negative amounts should be indicated by a minus sign.) b-2. What is the dollar-weighted rate of return? (Hint: If your calculator cannot calculate internal rate of return, you will have to use a spreadsheet or trial and error.) (Negative value should be indicated by a minus…