Answer:
The answer is given below;
Explanation:
EPS=Net income-preferred dividends/Weighted average shares outstanding
a.Net income=$300,000*(1-30%)=$210,000
Common stocks 100,000
Bonds assumed to be converted into common stocks =$2,000,000/$1,000=2,000*15=30,000
Total common stocks=100,000+30,000=130,000
Diluted EPS=$210,000/130,000=$1.615
b.
*Net income=210,000-(1,000,000*6%)=$150,000
Common stocks=100,000
Bonds =$1,000,000/$1,000=1,000*15=15,000
Preferred stocks=$1,000,000/$100=10,000*5=50,000
Total weighted average shares=100,000+15,000+50,000=165,000
Diluted EPS=Net income-preferred dividends/Weighted average shares
EPS=*$150,000/165,000=$.909
