Selected information from Indigo Corp.’s financial activities in the year 4 included the following: Net income was $ 5600000. The tax rate was 40 percent. 500000 shares of common stock were outstanding on January 1. The average market price per share was $ 82 in year 4. Dividends were paid in year 4. 6000, 5 percent $ 1000 par value convertible bonds, which are convertible at a ratio of 20 shares for each bond, were outstanding since January year 3. 200000 shares of common stock were issued on July 1. 100000 shares of common stock were purchased by the company as treasury stock on October 1. Indigo Corp.’s diluted earnings per share (Diluted EPS) for year 4 was closest to:
A．
| A. $9.74. |
B．
| B. $8.49. |
C．
| C. $8.32. |
参考答案：C
解析：To compute Indigo’s basic earnings per share (EPS) ((net income-preferred dividends)/ weighted average common shares outstanding), the weighted average common shares must be computed. ((500000×12)+(200000×6)-(100000×3)/12=)575000. EPS was ($ 5600000/575000=)$9.74. For Diluted EPS, assume the bonds were converted on January 1, and that interest payments were not made on the bonds. Increasing net income by the amount of bond interest net of tax effect is ($5600000+((6000×$1000×0.05)×(1-40))=)$5780000. Diluted EPS was ($ 5780000/(575000+120000)=)$ 8.32.