Assume that the following date relate to Fargo, Inc. for the year 2008:
Net income (30% tax rate) .......................................3,000,000
Average common shares outstanding 2008
1,000,000 shares 10% cumulative
convertible preferred stock:
Convertible into 80,000 shares of common ..............$1,600,000
8% convertible bonds; convertible into 75,000
shares of common .....................................................$2,500,000
Stock Options:
Exercisable at the option price of $25 per share;
average market price in 2008 :$30 .......................84,000 shares
a. Compute earnings per share
b. Compute diluted earnings per share