Answer:
c. $6.03
Explanation:
<u>Earnings available to common shareholders</u>
Net Income $6,000,000
Less: Preference dividend <u>$200,000 </u>
Net Income available to common shareholders <u>$5,800,000</u>
<u />
Number of Common shares = 950,000
Equivalent common shares for convertible 5% Bonds = 10,450. [Number of bonds = 2,100,000/1,000 = 2,100 shares. Equivalent common shares = 2,100 * 5 = 10,500 shares]
Weighted average number of common shares outstanding = 950,000 + 10,500 = 960,500
Earnings per share = Earnings available to common shareholders / Weighted average number of common shares outstanding
Earnings per share = $5,800,000 / 960,500
Earnings per share = 6.038521603331598
Earnings per share = $6.04
