how to calculate diluted earnings per share (EPS)
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Question
Shipley Corporation had net income for the year of and a weighted average number of common shares outstanding during the period of 200,000 shares. The company has a convertible bond issue outstanding. The bonds were issued four years ago at par ($2,500,000), carry a 7% interest rate, and are convertible into 40,000 shares of common stock. The company has a 40% tax rate. Diluted earnings per share are
a. $2.06
b. $2.79.
c. $2.94.
d. $3.22.
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