Question
Donut Corp had 1,500,000 shares of common stock outstanding and the beginning of 2021. At the end of the year, Donut reported net income of
Donut Corp had 1,500,000 shares of common stock outstanding and the beginning of 2021. At the end of the year, Donut reported net income of $5,000,000. Consider the other available information.
On June 1, 2021, Donut executed a 2 for 1 stock split.
Donut repurchased 500,000 shares of its own stock on October 1, 2021.
Donut had 150,000 stock options that had a strike price of $20. Donut also had 200,000 executive stock options outstanding with a strike price of $10. The market value of Donut's stock was $40.
Donut also had $2,000,000 of 8% convertible debt that was convertible into 200,000 shares of common stock.
Donut's tax rate is 40%.
Required:
a. Compute the weight average shares outstanding
b. Compute basic EPS
c. Show the numerator/denominator effects of each potentially dilutive security and label as dilutive or anti-dilutive.
d. Compute diluted EPS
Step by Step Solution
There are 3 Steps involved in it
Step: 1
a Compute the weighted average shares outstanding 1 Beginning shares 1500000 2 After the 2for1 stock ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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