Peters Corp.'s capital structure was as follows: December 31 Year 1 Year 2 Outstanding shares of stock: Common Convertible preferred 110,000 10,000 110,000 10,000 During year 2, Peters paid dividends of $3.00 per share on its preferred stock. The preferred shares are convertible into 20,000 shares of common stock and are considered common stock equivalents. Net income for year 2 was $850,000. Assume that the income tax rate is 30%. The diluted earnings per share for year 2 is $6.31 got ange How we tele this ! $6.54 Diluted earnings per share is based on common stock and all dilutive potential common shares. To determine if a security is dilutive, EPS, including the effect of the dilutive security, must be compared to the basic EPS. In this case, basic EPS is $7.45. $7.08 $7.45