Question
Complex Casting Company has 500,000 shares of common stock outstanding. The company also has the following potentially dilutive securities: 50,000 stock options exercisable at $50
Complex Casting Company has 500,000 shares of common stock outstanding. The company also has the following potentially dilutive securities:
50,000 stock options exercisable at $50 each and 60,000 stock warrants exercisable at $35 each. The average market price for the company's common stock is $40/share.
25,000 shares of $100 par 5% cumulative preferred stock. Each share of preferred stock is convertible to 4 shares of common stock.
Net income for the year is $1,000,000 and the company's tax rate is 40%.
Required: Determine whether each of the potentially dilutive securities is dilutive or anti-dilutive. (You may need to compute Basic EPS and Diluted EPS to determine your answer)
1. Stock options
2. Stock warrants
3. Convertible preferred stock
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