diluted eps

问题如下：

Question The company’s diluted EPS is closest to:

选项：

A.$7.57. B.$7.69. C.$7.72.

解释：

Solution

1. Incorrect. Preferred dividends were included after preferred conversion.

2. Incorrect. After-tax interest on bonds was not added back after bond conversion: after-tax interest is (1 – 0.40) × 8% × $80,000 = 3,840.

3. Correct. Because both the preferred shares and the bonds are dilutive, they should both be converted to calculate the diluted EPS. Diluted EPS is the lowest possible value.

   Analyzing Income Statements

   • describe how earnings per share is calculated and calculate and interpret a company’s basic and diluted earnings per share for companies with simple and complex capital structures including those with antidilutive securities