James Company had bonds which are convertible into shares of common stock. There were two bonds, both issued at par. One was for $400,000 and was purchased on January 1st with an interest rate of 6%, this bond is convertible into 200,000 shares of common stock. The second bond was for $600,000 and had an interest rate of 8% and was purchased on May 1st, this bond is convertible into 400,000 shares
James Company had bonds which are convertible into shares of common stock. There were two bonds, both issued at par. One was for $400,000 and was purchased on January 1st with an interest rate of 6%, this bond is convertible into 200,000 shares of common stock. The second bond was for $600,000 and had an interest rate of 8% and was purchased on May 1st, this bond is convertible into 400,000 shares of common stock. Interest on both bonds is paid annually. The overall tax rate for the organization is 20%.
Additionally, net income is $800,000, but does not include interest expense or taxes. The organization currently has 460,000 shares of common stock outstanding.
A. Calculate Earnings Per Share
B. Calculate Dilutive Earnings Per Share using the if converted method.
C. Is the organization anti-dilutive? Explain your answer.
Earnings per share is very important for the shareholders because the shareholders are true owners of the company and they are very important.
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