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PROBLEM 16-7 - a $3,000,000 X.06 Preferred stock is not...

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PROBLEM 16-7
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(a) Basic EPS = $1,200,000 – ($3,000,000 X .06) 600,000* = $1.70 per share *$6,000,000 ÷ $10 (b) Diluted EPS = (Net income – Preferred dividends) + Interest savings (net of tax) Average common shares + Potentially dilutive common shares = $1,200,000 – $180,000 a + $96,000 b 600,000 + 10,000 c + 80,000 d = $1,116,000 690,000 = $1.62 per share
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Unformatted text preview: a $3,000,000 X .06; Preferred stock is not assumed converted since conversion would be antidilutive. b $2,000,000 X .08 X (1 – .40) c Market price – Option price X Number of options = incremental shares Market price $25 – $20 X 50,000 = 10,000 $25 d ($2,000,000 ÷ $1,000) X 40 shares/bond...
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