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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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    Solution Preview

    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 ...

    Solution Summary

    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.

    $2.19

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