A company has outstanding ($ 100,000) of (8 %) convertible bonds due in five years. Each ($

Question:

A company has outstanding $\$ 100,000$ of $8 \%$ convertible bonds due in five years. Each $\$ 1,000$ convertible bond is convertible into 40 shares of common stock. Net income for the year was $\$ 640,000$. Common shares outstanding for the year were 250,000 . The relevant tax rate is $25 \%$.

a. Compute basic earnings per share.

b. Compute diluted earnings per share.

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