Answer:
Ignatius Corporation
Basic and Diluted EPS are:
c. $ 2.85 $ 2.67
Explanation:
Data and Calculations:
Common stock outstanding = 7 million shares
Issued 10,000, $1,000 convertible bonds = $10,000,000
Convertible bonds = 10,000 bonds = 500,000 shares (10,000 x 50)
Interest payment = semiannual at 10% per annum
6%, 100,000 Cumulative preferred stock at $100 par = $10,000,000
Preferred dividend = $600,000
Net Income of $20 million
Basic EPS = $20,000,000/7,000,000 = $2.857 per share
Diluted EPS = $20,000,000/7,500,000 = $2.67 per share
To obtain the diluted EPS, the outstanding common stock is increased by the number of potential convertible bonds.
