. A firm has 200,000 common shares outstanding on January 1. At that time, the firm held 10,000 additional shares in treasury, and they remained in treasury for the whole year. On June 30, the firm had a 2:1 stock split. All shares, including those in treasury participated in the split. On December 31, the firm reported $500,000 in net income. The firm has 100 employees who currently hold 1,000 stock options each. All options have an exercise price of $25 per share without any split-adjustment The firm has 5,000 shares of 7% convertible preferred stock. The par value of each share is $100 and can be converted to 7 shares of common stock (NOT split-adjusted). The firm has 1,000 shares of 9% convertible preferred stock. The par value of each share is $100 and can be converted to 5 shares of common stock (NOT split-adjusted), The firm has 3,000 convertible bonds (each has a face value of $1,000) that were issued at por with a coupon rate of 6%. Each bond is convertible to 40 shares of common stock (NOT split-adjusted) The firm has 5,000 convertible bonds (each has a face value of $1,000) that were issued at par with a coupon rate of 10%. Each bond is convertible to 28 shares of common stock (NOT split-adjusted), The firm's average market price during the year was $15 per share (split adjusted). Assume the firm's tax rate is 30% (1) Calculate Basic EPS -- just as we did above. (2) Include the effects of stock options and warrants - these will always be dilutive if they are in the money include those) and will always be antidilutive if "out of the money" (do not include those). (3) Calculate the EPS effects of each conversion separately (preferred stock and bonds) - these may or may not be dilutive. It depends on all the other options and conversions. 14) Rank the conversions from lowest EPS effect to the highest I (5) Apply the conversions in rank order. include only conversions whose EPS effect is lower than the diluted EPS up to that point