Donut Corp had 1,500,000 shares of common stock outstanding and the beginning of 2021. At the end of the year, Donut reported net income of $5,000,000. Consider the other available information.

On June 1, 2021, Donut executed a 2 for 1 stock split.

Donut repurchased 500,000 shares of its own stock on October 1, 2021.

Donut had 150,000 stock options that had a strike price of $20. Donut also had 200,000 executive stock options outstanding with a strike price of $10. The market value of Donut's stock was $40.

Donut also had $2,000,000 of 8% convertible debt that was convertible into 200,000 shares of common stock.

Donut's tax rate is 40%. 

Required:

a. Compute the weight average shares outstanding 

b. Compute basic EPS 

c. Show the numerator/denominator effects of each potentially dilutive security and label as dilutive or anti-dilutive.

d. Compute diluted EPS 

Answer rating: 100% (QA)

a Compute the weighted average shares outstanding 1 Beginning shares 1500000 2 After the 2for1 stock ... View the full answer