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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?

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