Question

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Throughout 2015, Smith had 200,000 shares of common stock outstanding. Smith's net income for the year...

Throughout 2015, Smith had 200,000 shares of common stock outstanding. Smith's net income for the year ended December 31, 2015 was $800,000. Smith's income tax rate is 20%. During 2015, Smith declared and paid dividends on its 10,000 shares of 6% convertible preferred $100 par value stock. Each share of the convertible preferred stock can be converted, at the discretion of the stockholder, into 3 shares of Smith's common stock.

During the entire year ending 12-31-15, Smith had 15,000 outstanding employee stock options. Each option had an exercise price of $30 per share of Smith common stock. During the year ended 12-31-15, the average market price of Smith's common stock was $50 per share.

What will Smith report as its diluted earnings per share for the year ended 12-31-15?

Answer options:

A. $3.88

B. $3.70

C. $3.14

D. $3.59

E. $3.39

Solutions

Expert Solution

Answer is E 3.39

ekkarill92 answered 1 year ago
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