At January 1, 2016, Canaday Corporation had outstanding the following securities

Question

At January 1, 2016, Canaday Corporation had outstanding the following securities: 730 million common shares 50 million 5% cumulative preferred shares, $50 par 6% convertible bonds, $2,000 million face amount, convertible into 60 million common shares The following additional information is available: • On September 1, 2016, Canaday sold 84 million additional shares of common stock. • Incentive stock options to purchase 50 million shares of common stock after July 1, 2015, at $10 per share were outstanding at the beginning and end of 2016. The average market price of Canaday’s common stock was $25 per share during 2016. • Canaday's net income for the year ended December 31, 2016, was $1,528 million. The effective income tax rate was 40%. Required: 1. & 2. Calculate basic and diluted earnings per common share for the year ended December 31, 2016. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Explanation / Answer

Ans) Canaday Corporation Common shares $     730.00 Million Preferred shares $        50.00 Million 5% Cumulative Preferred shares ,$50 Par 6% Convertible Bonds $ 2,000.00 Million Net Income $ 1,528.00 Preferred dividend $     125.00 Weighted Average shares of common stock outstanding 1/1/2013-31/12/2013 730 Million*(12/12) 730 1/9/2013-31/12/2013 84 Million*(4/12) 28 Weighted average shares 758 Basic EPS= $       1.85 Shares were dilluted because exercise price $10 is less than the average price of $25 Proceeds received on exercise $ 500.00 Million Shares Purchased 20 Million Net Increase in shares outstanding 30 Million EPS after inclusion of the option $       1.78 Interest on convertible bonds net of tax $   72.00 Million Additional shares on conversion 60 Million Conversion Ratio $     1.20 Dilutive because $1.20 is less than $1.78 Basic EPS $          1.85 Diluted EPS $          1.80

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