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Question
Prince Corp. has the following balance sheet information at December 31, 2011.
The convertible bonds were issued at par on April 1, 2011 and are convertible into Prince's common stock at a ratio of 25 shares of stock to 1 bond. Prince did not have any treasury stock at December 31, 2010 and purchased the 9,000 shares evenly throughout 2011. The average price of the common stock for the year was $40, and the year end price was $45.
Prince Corp. also has 60,000 outstanding and exercisable qualified employee stock options. Employees obtain one share of stock for each option exercised. The exercise price for each option is $21 per share.
Prince's net income for the year ended 2011 was $292,500. Its tax rate for the year was 35%.
Required:
1. Compute basic EPS for the year ended December 31, 2011. Show all computations.
2. Compute diluted EPS for the year ended December 31, 2011. Show all computations.
Answer
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