The following information is available for a company for the year 2021.

Net income $390,000

Interest expense $100,000

Income tax rate 22%

(A).The $100,000 interest expense relates to convertible bonds. For Basic EPS purposes, the weighted average number of common shares outstanding was 136,000. Ejercicio 2 - The company had 1,000 convertible bonds. Each bond is convertible into 25 common shares. The bonds were issued in 2017. Bondholders have the option to convert the bonds starting in 2022.

Compute Basic and Diluted EPS for 2021.

B). Assume that the bonds in Exercise (A) ARE NOT convertible. However, the company has convertible, cumulative preferred stock. These shares were issued on July 1, 2018 and each $100 par share is entitled to a 5% dividend. There are 10,000 shares outstanding and each share is convertible into five shares of common stock. NO dividends were paid in 2020. In July of 2021, the company paid both the 2020 and 2021 preferred dividends. REQUIRED: Compute diluted EPS for 2021. Basic EPS will be the same that you computed in Exercise 2.

C. Assume that the preferred shares in Exercise (B.) ARE NOT convertible. On July 1, 2020, the company granted options for 40,000 shares of common stock, exercisable in 2023. The exercise price is $20 and the average market price for 2021 was $25.

Compute diluted EPS for 2021. Basic EPS will be the same that you computed in Exercise (A)