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Question 3 Sonic Ltd. had 1,400,000 average ordinary shares outstanding during all of 2020. During...

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Finance

Question 3 Sonic Ltd. had 1,400,000 average ordinary shares outstanding during all of 2020. During 2020, Sonic also had 70,000 options outstanding with exercise prices of $20 each. The average stock price of Sonic during 2020 was $35. This company also had 10,000 shares of preferred stock outstanding ( $2 dividend per share) for the entire year, each convertible into 25 shares of common stock. The company has $150,000 of 9% bonds, convertible into 50,000 ordinary shares. Sonic had $3,600,000 net income for the year. The corporate tax rate is 30%. Calculate the following for Sonic for 2020:

a) What is the basic EPS share for 2020? (1 Mark)

b) Calculate the weighted average number of shares outstanding for 2020 if all dilutive securities are converted into ordinary shares at the beginning of the year? Show all workings. (6 Mark)

c) What is the diluted EPS for 2020? (1 Mark)

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