A firm has a net income of $325,000 and declared $25,000 of preferred stock dividends. They have weighted average shares of 200,000.

The only common stock equivalents they have are 30,000 stock options that have been outstanding all year. They are exercisable at $10 when the average and ending stock price is $15.

REQUIRED: (show your work)

1. Calculate Basic EPS

2. Determine if the options are dilutive (show your decision process" proof")

3. Calculate Diluted EPS