EPS and Interest-Coverage Ratio Computations Baltimore Shipping Company has outstanding 500,000 shares of common stock, $5 million of 8% preferred stock, and $8 million of 10% bonds payable. Its income tax rate is 40%. 1. Assume the company has $6 million of income before interest and taxes. Compute

(a) EPS and

(b) number of times bond interest has been earned. 2. Assume $3 million of income before interest and taxes, and make the same computations.