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A company has a basic EPS of $7.50 per share. It has 15,000 preferred shares with a dividend rate of $20 per share, cumulative and

A company has a basic EPS of $7.50 per share. It has 15,000 preferred shares with a dividend rate of $20 per share, cumulative and non-participating and convertible into to common shares are the rate of 2 common shares for each preferred share. Choose the option that best describes the impact of the preferred shares on the diluted EPS calculation:

a) The numerator will be reduced by the dividends of $300,000 and the denominator will be increased by 15,000 shares

b) The numerator will be increased by the dividends of $300,000 and the denominator will be increased by 30,000 shares

c) Anti-dilutive so no adjustment is required.

d) The numerator will be decreased by the dividends of $300,000 and the denominator will be increased by 30,000 shares

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