Org XYZ - - Earning after tax: $850,000 - 500,000 common stock shares, par value $10 each - Tax rate 30% - 350,000 of 8% $10 par convertible preferred stock. Each preferred share is convertible into 2.5 shares of common stock. Calculate Diluted earnings per share. since there seems to be some confusion above… Basic EPS: (850 - 350 * 10 * .08) / 500 = 1.14 Diluted EPS: Preferred Stock is converted. If converted, there is no more preferred dividend. So Numerator = 850 Denominator = 500 + 350 * 2.5 = 1375 So Diluted EPS = 850/1375 = .618 Ans.
that’s why my head was spinning with treatment of the preferred dividend… I knew there was something not right…thanks cpk.
i get 850 + div (1-tax) / 1375 850 + 28 *.7 / 1375 .63 cents Could someone please confirm.
ok. i got this wrong, as preferred dividends are taken from NI, not from EBT. blah… i’ll fail.
Should the tax rate on the coupon be accounted for?? This is what I calculated: [850,000+ 280,000 (1-.3)]/1,375,000 = .76 Diluted EPS
R6Chick Wrote: ------------------------------------------------------- > Should the tax rate on the coupon be accounted > for?? > > This is what I calculated: > > [850,000+ 280,000 (1-.3)]/1,375,000 = .76 Diluted > EPS Incorrect. Tax rate has no bearing in this question since pref. divs are given out after you’ve come up with your NI.
pepp Wrote: ------------------------------------------------------- > R6Chick Wrote: > -------------------------------------------------- > ----- > > Should the tax rate on the coupon be accounted > > for?? > > > > This is what I calculated: > > > > [850,000+ 280,000 (1-.3)]/1,375,000 = .76 > Diluted > > EPS > > > Incorrect. > > Tax rate has no bearing in this question since > pref. divs are given out after you’ve come up with > your NI. Aww, thanks, I read bond instead of preferred stock. Is it the 7th yet?