Question - The following data relate to Nevada Ltd. for the calendar year 2014:
Net income (30% tax rate) ................................... $3,500,000
Average number of common shares outstanding during 2014 ................................. 1,000,000 shares
10%, cumulative convertible preferred shares: convertible into 80,000 common shares ............. $1,600,000
8% convertible bonds; convertible into 75,000 common shares .............................................. $2,500,000
Stock options, exercisable at $25 per share ............ 90,000 shares
All the convertible securities and stock options were outstanding all year.
The average market price of the common shares in 2014 was $30.
Instructions - Calculate:
a. Basic earnings per share
b. Diluted earnings per share.