Hite corporation intends to issue $160,000 of 5% convertible bonds with a conversion price of $40 per share. The company has 40,000 shares of common stock outstanding and expects to earn $600,000 before interest and taxes a year the federal income tax rate is 40%

(a) Compute earnings per share before and after the conversion (assume that all bonds are converted)

(b) Determine the effect of the conversion on the control of the firm