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Source of Capital; Owners Equity

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During its fiscal year, a company had outstanding 600,000 shares of $6.50 preferred stock and 2,000,000 shares of common stock. The company's net income for the year was $19,550,000. The company also had granted stock options to employees for 200,000 shares of common stock during the fiscal year was $20 per share.

a. Calculate the company's basic earning per share.
b. Calculate the company's diluted earning per share.

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This solution is comprised of a detailed explanation to calculate the company's basic earning per share and the company's diluted earning per share.

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a. Calculate the company's basic earning per share.

Basic earning per share = Net Income - Dividends on Preferred stock
Average outstanding common stocks

From the information given, there is no indication that there is the payment of dividends on preferred stock. Therefore, we ...

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