AuthorTopic: Earnings Per Share
@2008-03-05 01:52:08
I have the following question. It appears to be an easy question, but for some reason I am stumped. Here it goes:

XYZ Company had net income during 2004 of $20 million. It had 100,000 shares of 6% preferred stock outstanding with a par value of $100. XYZ began the year with 20 million common shares outstanding. However, it issued an additional 5 million shares at July 1 in a secondary offering. XYZ also has $15 million in convertible bonds with a 3% coupon due in 2014 convertible into common stock at a conversion price of $15 per share. At December 31, 2004; the companyís common stock closed at $13.75 per share. Calculate XYZís Basic and Diluted EPS for 2004

My answers:

Basic EPS: $.86

Diluted EPS: I have been getting two answers. The answer I think is the correct answer is $.84. However, I get another answer of $.85.

Can anyone tell me which one is correct and explain it?

Thank you.

CFA Discussion Topic: Earnings Per Share

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