Question: A company has outstanding $ 1 0 0 , 0 0 0 of 8 % convertible bonds due in five years. Each $ 1 ,

A company has outstanding $100,000 of 8% convertible bonds due in five years. Each $1,000 convertible bond is convertible into 40 shares of common stock. Net income for the year was $640,000. Common shares outstanding for the year were 250,000. The tax rate is 25%.
a. Compute basic earnings per share.
b. Compute diluted earnings per share.

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