Problem 3 Assume that P & P Products had net income of $220,000 and had 125,000 weighted shares of common stock outstanding. They also had 5,000 shares of $100 par value, 8 percent, non- cumulative preferred stock outstanding. Required: Calculate basic EPS.

1.44 dollars per share (The basic EPS) answer for question 3

Only Answer question 5

Problem 5 Refer to Problem 3. Assume that P & P Products also had 1,000 convertible bonds outstanding. The bonds pay 2 percent interest annually and mature in 2020. Furthermore, assume that each bond is convertible into 100 shares of $10 par value common stock. The current market value of the common stock is $12 per share. Required: Calculate diluted earnings per share. The marginal tax rate is 30 percent