20070920180637531

# 20070920180637531 - EPS PROBLEM From the following...

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EPS PROBLEM From the following information, compute basic and fully diluted EPS: Net income was \$1,750,000. 400,000 shares were outstanding on January 1. On July 1, the company issued 200,000 shares. Options were granted last year to purchase 50,000 shares of common stock at \$20 per share. Average market price of the stock was \$30 per share. Outstanding were \$2,500,000 of 8% convertible bonds issued at face value. Each \$1,000 bond is convertible into 40 shares of common stock. Outstanding were \$2,500,000 of 10% convertible bonds issued at face value. Each \$1,000 bond is convertible into 40 shares of common stock. 25,000 shares of \$10 preferred stock were outstanding. Each share is convertible into 4 shares of common stock. Preferred dividends were declared. Tax rate is 40%. The weighted average shares of common stock outstanding are 500,000. The preferred dividends are \$250,000. Basic EPS is: Basic EPS = (\$1,750,000 - \$250,000) / 500,000 = \$3.00 The effect of the options is 50,000 - (50,000 x \$20) / \$30

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20070920180637531 - EPS PROBLEM From the following...

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