As an analyst you have gathered the following information about a company for the year ended December 31, 2009:
Net income was $10.5 million.
Stockholders' equity at December 31, 2009 was $100 million.
Common stock dividends of $3.5 million were paid.
20 million shares of common stock were outstanding on January 1,2009.
The company issued 6 million new shares of common stock April 1, 2009.
Outstanding preferred shares:
5 million shares, each convertible into 1.5 common shares par value $1 per share; liquidating value $5 per share Annual dividend $4 per share.
a. Compute the company's basic EPS for 2009.
b. Compute the company's diluted EPS for 2009.
c. Compute the company's book value per share at December 31, 2009.
d. Compute the company's book value per share at December 31, 2009 assuming conversion of the preferred shares into common shares.
e. Explain why the diluted calculations (part b and d) provide pre-share amounts that are more suitable for valuation than the amounts calculated in parts a and c.
(Please show all supported calculation to the answer)