Calculate the incremental EPS for the following instrument: Face value of 10,000 preferred shares with dividend rate of 5%
$5,000,000
Conversion rate for each preferred share
25 ordinary shares
Income tax rate
30%
A)$0.30
B)$0.70
C)$1.00
D)$2.00

Question

Quizplus · Accepted Answer

The incremental EPS is calculated by dividing the net income attributable to the new ordinary shares by the number of new ordinary shares. The preferred dividend is $500,000 (5% of $10,000,000). The conversion results in 250,000 new ordinary shares (10,000 shares * 25). The incremental EPS is $500,000 / 250,000 = $2.00.

Calculate the Incremental EPS for the Following Instrument: Face Value