The Stockholders€™ Equity section of the balance sheet for Lahey Construction Company at the end of 2010 is as follows:
9%, $10 par, cumulative preferred stock, 500,000 shares authorized,
200,000 shares issued and outstanding $ 2,000,000
Additional paid-in capital on preferred 7,500,000
Common stock, $1 par, 2,500,000 shares authorized,
1,500,000 shares issued and outstanding 1,500,000
Additional paid-in capital on common 21,000,000
Retained earnings 25,500,000
Total stockholders€™ equity $57,500,000
The lower portion of the 2010 income statement indicates the following:

Assume that the number of shares outstanding did not change during the year.
Required
1. Compute earnings per share before extraordinary items.
2. Compute earnings per share after the extraordinary loss.
3. Which of the two EPS ratios is more useful to management? Explain your answer. Would your answer be different if the ratios were to be used by an outsider (e.g., by a potential stockholder)? Why or whynot?

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Net income before tax Income tax expense (40%) Income before extraordinary items Extraordinary loss from flood $ 9,750,000 3,900,000) S5,850,000 $(6,200,000) 2,490,000 Less related tax effect (4096) Net income (3.720,000 S2,130,000