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The Smith Company had a net income for the year of $4,000 and had 2,000 shares of common stock outstanding during the year. Below are

The Smith Company had a net income for the year of $4,000 and had 2,000 shares of common stock outstanding during the year. Below are three potential diluters. 1. 10% convertible bonds that, if converted, would reduce after-tax interest expense by $800 and would add 1,000 incremental common shares to the denominator of EPS. 2. Stock options that, if exercised, would not change the numerator of EPS but would add 1,000 incremental common shares to the denominator. 3. 7% convertible preferred stock that, if converted, would increase the numerator of EPS by $700 and would add 500 incremental common shares to the denominator

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