MORE EARNINGS PER SHARE

On January 1, 2014, Buffy Industries had outstanding 880 million common shares (par $1) that originally sold for $19 per share, and 8 million shares of 10% cumulative preferred stock (par $100), convertible into 80 million common shares.

On September 30, 2014, Buffy sold and issued an additional 32 million shares of common stock at $38. At December 31, 2014, there were common stock options outstanding, issued in 2013, and exercisable for 40 million shares of common stock at an exercise price of $30. The market price of the common stock at year-end was $48. During the year the price of the common shares had averaged $40.

Net income was $1,300 million. The tax rate for the year was 40%.

Required:

a. Compute basic EPS.

b. Determine whether each security is dilutive.

c. Compute diluted EPS.