Problem #$4$

Diluted EPS with Stock Options, Warrants, and Convertible Bonds

During $2023,$ the Minnesota Design Company had the following information regarding its capital structure:

$70,000$ stock options with an exercise price of $$45.$ The stock options were issued during $2020.$

$10,000$ warrants with an exercise price of $$40.$ Each warrant is convertible into two shares of common stock. The warrants were issued during $2021.$

$500,000$ shares of common stock with a par value of $$1.$ No stock was purchased or issued during $2023.$

$3,0005\%$ convertible bonds. Each $$100$ bond can be converted into $10$ shares of common stock. The bonds were issued on January $1,2021,$ and can be converted at any time after December $31,2022.$

Minnesota Design reported net income of $$670,000$ during $2023$ and paid dividends on preferred stock of $$20,000.$ The tax rate during $2023$ is $40\%.$ The average market price of Minnesota Design's stock during $2023$ was $$80.$

REQUIRED:

Compute basie EPS for Minnesota Design for $2023.$

Determine the dilution effect for each convertible security.

Compute diluted EPS for Daktronics for $2023.$