Question: Behrend Corp. reported net income of $520,000 for 2013. Their income tax rate was 40% and they reported no below the line items. Behrend had 200k shares of common stock outstanding at1/01/13, issued an additional 150k shares on 4/01/13, and purchased 50k treasury shares on 10/01/13. The average market price of Behrend's stock during 2013 was $25. Throughout 2013 Behrend also had the following securities outstanding:
- 10k shares of $100 par value 7% cumulative preferred stock (annual preferred dividend requirement of $7/share). Each preferred share is convertible into 5 shares of common stock.
- $10,000,000 of 6% bonds payable issued at face value. Each $1,000 bond is convertible into 25 shares of common stock.
- Stock warrants to purchase 80k shares of Behrend Corp. common stock for $20/share.
Required:
- Calculate basic EPS for 2013 (show your work - answer should be $1.50/share),
- Determine diluted EPS for 2013 (in formulating your answer, provide the "incremental effect" on the EPS numerator and denominator for each of the potentially dilutive securities a, b and c above)