Question

Peyton plans to raise $1,000,000 million of additional capital for the coming year. They anticipate

that it will enable them to earn an additional $600,000 after tax. What would be the impact on

earnings per share if the raise the $1,000,000 by:

a) issuing 10,000 share of 10% $100 par value convertible preferred stock, where share

     can be coverted into 10 shares of Peyton common stock?

b) issuing $1,000,000 of 8% convertible bond, each $1,000 bond can be converted into?

     5 shares of Peyton common stock?

c) $500,000 of each of the above?

Answer 1