On Jan 1 Yellow Car Company issued 15-year, $50,000,000 face value, 4% bonds, at par value.
Each $1,000 bond is convertible into 20 shares of Yellow Car common stock.
The bonds were not converted in the current year.
Yellow Car's net income in the current year was $8,680,000, and its tax rate was 30%.
The company had 2,650,000 shares of common stock issued and outstanding throughout the current year.
(a) Solve for diluted EPS for the current year.
(b) Solve for diluted EPS for the current year, using the data found above, except instead of the bods, $50,000,000 of 6% convertible preferred stock was issued. Each $100 preferred share is convertible into 2 shares of Yellow Car common stock.
Your tutorial is attached. Notice the test for anti-dilutive securities for diluted EPS.