Ute Co. had the following capital structure during Year 1 and Year 2:

Preferred stock, $10 par, 4% cumulative,

25,000 shares issued and outstanding $ 250,000

Common stock, $5 par, 200,000 shares

issued and outstanding 1,000,000

The preferred stock is not convertible. Ute reported net income of $500,000 for the year ended December 31, Year 2. Ute paid no preferred dividends during Year 1 and paid $16,000 in preferred dividends during Year 2. In its December 31, Year 2, income statement, what amount should Ute report as basic earnings per share?

a. $2.42

b. $2.45

c. $2.48

d. $2.50