Compute earnings per common share

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Question: The Bjorn Grad in Blade Manufacturing Corporation has 500,000 common shares and 200,000 preferred shares outstanding. The preferred shares call for an annual dividend of $ 1.60 per share. The firm has just issued $2,000,000 worth of 20-year debentures with a 1 0-percent coupon rate and sinking-fund payments of $ 1 00,000 per year. Corporate income taxes are 40 percent. Compute

(a) earnings per common share; and

(b) earnings per common share available after annual sinking-fund payments, for different assumptions about future performance. Assume that earnings before interest and taxes could be $7 50,000, $900,000, or $ 1,400,000.

Reference no: EM131750046

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