Problem:
Assume that the following data related to Fargo, Inc for the year 2008
Net income (30% tax rate) $3,000,000
Average common shares outstanding 2008 1,000,000 shares
10% cumulative convertible preferred stock:
Convertible into 80,000 shares of common $1,600,000
8% convertible bonds: convertible into 75,000
shares of common $2,500,000
Stock options:
Exercisable at the option price of $25 per share;
average market price in 2008, $30 84,000 Shares
Instructions; compute A) basic per share, and B) diluted earnings per share.