Question

The following information is for Crane Limited for 2020:

Net income for the year		$2,230,000
8% convertible bonds issued at par ($1,000 per bond), with each bond convertible into 40 common shares		2,110,000
6% convertible, cumulative preferred shares, $100 par value, with each share convertible into 3 common shares		3,900,000
Common shares (400,000 shares outstanding)		4,000,000
Stock options (granted in a prior year) to purchase 65,000 common shares at $20 per share		850,000
Tax rate for 2020		30%
Average market price of common shares		$25	per share

There were no changes during 2020 in the number of common shares, preferred shares, or convertible bonds outstanding. For simplicity, ignore the requirement to book the convertible bonds’ equity portion separately.Calculate the income effect of the dividends on preferred shares.

Dividends on preferred shares

$Enter your answer in accordance to the question statement

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Assistance Used

• eTextbook 1
• eTextbook 2

  

  

Calculate basic earnings per share for 2020. (Round answer to 2 decimal places, e.g. 15.25.)

Basic EPS

$Enter your answer in accordance to the question statement

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Determine an incremental per share effect for 6% preferred shares. (Round earnings per share to 2 decimal places, e.g. 15.25.)

Potentially dilutive security		Incremental Numerator Effect		Incremental Denominator Effect		EPS
6% Preferred shares		$				$

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Calculate the proceeds from assumed exercise of 65,000 options.

Proceeds from exercise of options

$

Calculate the incremental shares oustanding upon the exercise of options.

The incremental shares oustanding upon the exercise of options

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Calculate the after-tax interest paid on the 8% bonds.

After-tax interest on bonds converted

$Enter your answer in accordance to the question statement

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Determine an incremental per share effect for 8% bonds. (Round earnings per share to 2 decimal places, e.g. 15.25.)

Potentially dilutive security		Incremental Numerator Effect		Incremental Denominator Effect		EPS
8% Bonds		$				$

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Rank the potentially dilutive securities from most dilutive to least dilutive.

8% Bonds		Rank 1Rank 2Rank 3Anti-dilutive
6% Preferred shares		Rank 1Rank 2Rank 3Anti-dilutive
Options		Rank 1Rank 2Rank 3Anti-dilutive

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Calculate diluted earnings per share for 2020. (Round earnings per share to 2 decimal places, e.g. 15.25.)

		Numerator		Denominator		EPS
Basic		$				$
6% Preferred shares8% BondsOptions
Sub Total
6% Preferred shares8% BondsOptions
Sub Total
6% Preferred shares8% BondsOptions
		$				$

Diluted EPS

Answer 1

SUMMERY OF ANSWER

PART 2)

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