Carter Construction had net income of $350,000. They began the year with 25,000 common shares issued and outstanding. On June 30, they issued 10,000 additional shares. There were no other transactions affecting common stock. The average market price of the common stock during the year was $30/share. The market price of the common stock at the end of the year was $34/share. The company's marginal tax rate is 20%. The following information pertains to securities issued by the company. Each security was outstanding during the entire year.

1. 5,000 options to buy common stock with an exercise price of $28/share. In addition, there is $4 of unrecognized compensation cost associated with each option.

2. 10,000 shares of 5%, $100 par, cumulative, non-convertible preferred stock with an average market price of $105/share and an ending market price of $108/share.

3. 2,000 shares of 7%, $100 par, cumulative, convertible preferred stock with an average market price of $109 and an ending market price of$107/share. Each share of preferred stock is convertible into 5 shares of common stock.

4. 200 $1,000 bonds with a stated interest rate of 10%, convertible into 50 shares of common stock, issued at 105. The premium is being amortized at the rate of $500/year.

Compute Carter Construction's Basic Earnings per Share 

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To compute the basic earnings per share EPS for Carter Construction we follow these steps Step 1 Cal... View the full answer