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Diluted EPS for 2005

Information concerning the capital structure of the Petrock Corporation is as follows:

December 31, 2004 2005
Common stock 90,000 shares 90,000 shares
Convertible preferred stock 10,000 shares 10,000 shares
8% convertible bonds $1,000,000 $1,000,000

During 2005 Petrock paid dividends of $1 per share on it common stock and $2.40 per share on its preferred stock. The preferred stock is convertible into 20,000 shares of common stock. The 8% convertible bonds are convertible into 30,000 shares of common stock. The net income for the year ending December 31, 2005 was $285,000, and the company's income tax rate was 40%.

Required:

1. What was the basic EPS for 2005, rounded to the nearest penny?
2. What was diluted EPS for 2005, rounded to the nearest penny?

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Solution Preview

Information concerning the capital structure of the Petrock Corporation is as follows:

December 31, 2004 2005
Common stock 90,000 shares 90,000 shares
Convertible preferred stock 10,000 ...

Solution Summary

This provides the steps to calculate the diluted EPS for 2005

$2.19