Kadri Corporation reported basic EPS of 3 00 and diluted

EPS
Kadri Corporation reported basic EPS of 3 00 and diluted EPS

Kadri Corporation reported basic EPS of $3.00 and diluted EPS of $2.40 for 2017. Its EPS
calculations follow:

Kadri issued the convertible preferred stock at the beginning of 2017 and the Series A and
Series B convertible debt at par in late 2016. No stock options were granted or exercised in
2017.
Required:
1. The convertible preferred stock has a $100 par value per share. How many preferred shares
were issued, and what was the common stock conversion rate for each preferred share?
2. The Series B convertible debt pays interest at 10% annually, and Kadri's marginal income tax
rate is 40%. How much Series B debt was outstanding, and what is the common stock
conversion rate for each $1,000 face Series B bond?
3. What are the interest rate and common stock conversion rate for the $5 million par of Series
A debt?
4. During the year, 50,000 shares were under option, and the average exercise price was $20
per share. What was the average market price of the company's common stock during 2017?
5. Explain why Series A debt carries a lower interest rate than Series B debt although both were
issued at par on the same day in 2016.

Kadri Corporation reported basic EPS of 3 00 and diluted EPS

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