You are introduced to convertible preferred stock in our final week. Let’s pretend we have the following information regarding a company that we are evaluating:
Net income – $1,000,000
Weighted average common shares outstanding – 100,000 shares
Preferred dividends paid – $100,000
Preferred shares outstanding – 10,000
Each share of preferred stock is convertible into 5 shares of common stock.
(3) Let’s assume that all shares were deemed to be converted as of the beginning of the year. What would Earnings per Share be after the conversion?