Selected information from Caledonia, Inc.’s financial activities in the year 2006 was as follows: Net Income was $ 460000. 2300000 shares of common stock were outstanding on January 1. The average market price per share was $ 2 and the year-end stock price was $1.50. 1000 shares of 8 percent, $1000 par value preferred shares were outstanding on January 1. Dividends were paid in 2006. 10000 warrants, each of which allows the holder to purchase 100 shares of common stock at an exercise price of $1.50 per common share, were outstanding the entire year. Caledonia’s Diluted earnings per share (Diluted EPS) for 2006 was closest to:
A．
| A. $0.165. |
B．
| B. $0.180. |
C．
| C. $0.149. |
参考答案：C
解析：Caledonia’s basic earnings per share (EPS) ((net income-preferred stock dividends)/weighted average common shares outstanding) was ((($ 460000-($ 1000×1000×0.08))/2300000=) $0.165. Using the treasury stock method, if the warrants were exercised, cash inflow would be (10000×100×$1.50=) $1500000. The number of Caledonia shares that could be purchased with the inflow, using the average share price, was ($1500000/$ 2=) 750000. The net increase in common shares outstanding would have been (1000000-750000=)250000. Diluted EPS was ($380000/(2300000+250000=) $0.149.
