EPS Problem December 31,2018 Stated Facts There were 100,000 shares outstanding on January 1,2018. 10,000 treasury shares were purchased on l 1,2018. 20,000 new shares were issued on October 1,2018. Two for one stock split was declared on December 1,2013. Net Income S600,000 A. Preferred Stock - $1,000,000 $100 par *Each preferred stock is converted into 5 shares of Common Stock . Cumulative . $100 par 10% B. Preferred Stock - $500,000. Non convertible 8% * cumulative C. Convertible bonds 12% Issued April 1, 2018 "At par - $2,000,000 Each bond $1,000 Each bond is convertible into 50 shares of Common Stock D. Convertible bonds 8% Issued February 15, 2015 At par 1,000,000 Each bond $1,000 Each bond is convertible into 40 shares of Common Stock * E. Outstanding 100,000 Stock Options *Issued January 1,2015 *Exercise price $30 *Market price $40 F. Outstanding 50,000 Stock Options Issued July 1, 2017 *Exercise price $45 Market price $40 G. No dividends were declared in 2018 and company's tax rate is 40% G. No dividends were declared in 2018 and company's tax rate is 40%. Required: 1.Calculate the base EPS. 2.Calculate the dilution indexes for each of the situations A - F. 3. Rank indexes from lowest to highest. 4. Calculate the diluted EPS. EPS Problem December 31,2018 Stated Facts There were 100,000 shares outstanding on January 1,2018. 10,000 treasury shares were purchased on l 1,2018. 20,000 new shares were issued on October 1,2018. Two for one stock split was declared on December 1,2013. Net Income S600,000 A. Preferred Stock - $1,000,000 $100 par *Each preferred stock is converted into 5 shares of Common Stock . Cumulative . $100 par 10% B. Preferred Stock - $500,000. Non convertible 8% * cumulative C. Convertible bonds 12% Issued April 1, 2018 "At par - $2,000,000 Each bond $1,000 Each bond is convertible into 50 shares of Common Stock D. Convertible bonds 8% Issued February 15, 2015 At par 1,000,000 Each bond $1,000 Each bond is convertible into 40 shares of Common Stock * E. Outstanding 100,000 Stock Options *Issued January 1,2015 *Exercise price $30 *Market price $40 F. Outstanding 50,000 Stock Options Issued July 1, 2017 *Exercise price $45 Market price $40 G. No dividends were declared in 2018 and company's tax rate is 40% G. No dividends were declared in 2018 and company's tax rate is 40%. Required: 1.Calculate the base EPS. 2.Calculate the dilution indexes for each of the situations A - F. 3. Rank indexes from lowest to highest. 4. Calculate the diluted EPS