Garfun, Inc., owns all of the stock of Simon, Inc. For 2014, Garfun reports income (exclusive of any investment income) of $480,
000. Garfun has 80,000 shares of common stock outstanding. It also has 5,000 shares of preferred stock outstanding that pay a dividend of $15,000 per year. Simon reports net income of $290,000 for the period with 80,000 shares of common stock outstanding. Simon also has a liability for 10,000 of $100 bonds that pay annual interest of $8 per bond. Each of these bonds can be converted into three shares of common stock. Garfun owns none of these bonds. Assume a tax rate of 30 percent.What amount should Garfun report as diluted earnings per share? (Round your intermediate percentage value to the nearest whole number and the final answer to 2 decimal places.)
1 answer:
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Answer: 28.57%
Explanation:
Average return given the variables will be;
Average rate of return =
Average rate of return = 1,000,000/3,500,000
Average rate of return = 28.57%