Issuance 3 Lump sum sale of bonds with detachable warrants Issue $28 million in $1,000 2.5% bonds each with ten detachable warrants. The exercise price for each warrant is $13. Interest is paid semi-annually, the bonds would issue at face value without the detachable warrants. The total issue price for the lump sum sale is expected to be $30,350,00, and the underwriter will charge $350,000 to take the issue to market.

Cash		30,000,000
Unamortized BIC		350,000
	PIC - Warrants		2,350,000
	Bonds Payable		28,000,000

Additional Info:

The company is a non-dividend company (i.e., neither common nor preferred stockholders are paid a dividend).

2 million shares of common stock outstanding.

Earnings before interest, issue expenses, and taxes is $12 million (expected increase of 5% year over year).

Stock price is $11 per share (expected increase of 4% year over year).

Tax rate for all years is 21%.

Questions:

1. Calculate the basic EPS

2. Calculate the diluted EPS

3. Calculate the Price to Earnings Ratio