Following applies to Southern Winn Ltd:
Common stock 320,000 shares outstanding
Convertible preferred stock 11,000 shares outstanding
5% convertible bonds $11,000,000
During 2011, Southern Winn Ltd paud dividends of $1 per shares on common stock and $5 per share on its' preferred. Preferred stock is convertible into 33,000 shares of common. The bonds are convertible into 110,000 shares of common. Net income for year end 12/31/2011 was $3,500,000. Tax rate 40%.
Warrants exercisable at $10 each to obtain 20,000 shares of common were outstanding all year. Market price for common stock is $21. Application of the treasury method for the assumed exercise of these warrants is used in computing dilutes earning per share. There are exactly 20,000 warrant outstanding and each can be exercised for 1 share of common stock.
Assume no security is antidilutive and thus no need to test any for antidilution.
a) What is basic earnings per share (EPS)
b) Assuming preferred stock is converted, what will change in the EPS computation?
c) Assuming the bonds are converted, what will change in the EPS computation?
d) Assuming the warrants are execised, what will change in the EPS computation?
e) What is dilute EPS?