Donut Corp had 1,500,000 shares of common stock outstanding and the beginning of 2021. At the end
Question:
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
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw