Name: __________________________ Problem chapter 16
1. Basic and diluted EPS.
The following information was taken from the books and records of Teller, Inc.:
Net Income
$800,000
Capital Structure: Convertible bonds 6% $30,000 worth. Each $500 bond can be converted into
40 shares of common stock.
The common stock $10 par started the year with 60,000 shares outstanding (issued 5 years ago).
On April 1 there was a repurchase of 4,000 shares. On July 1, reissued 6,000 shares of treasury
stock. On November 1 there was a 2 for 1 split.
At the end of the year there were stock warrants outstanding (for the whole year) to purchase
25,000 shares of stock for $20 per share. The average market price for the stock is $40.
The corporate income tax rate averages 40%.
Instructions
Compute basic and diluted earnings per share.