How much will be FDC’s Diluted Earnings per Share if all the preferred stock sha

Question

How much will be FDC’s Diluted Earnings per Share if all the preferred stock shares are converted into common?

Fixer Downer Corp (FDC) has provided you with the following information:

$4.643

$4.000

$5.307

$4.128

Net income available to common stockholders $2,600 Tax rate 40% Number of common stock shares (this year) 560 Number of common stock shares (last year) 560 Market price per share common stock $80 Preferred dividend (aggregate, not per share) $120 Number of preferred stock shares (this year) 60 Common shares for each preferred share if converted 4

Explanation / Answer

Answer:

above is the correct answer. I don't see any reason, for the answer not be there in the options.

Net Income Available to common share holder 2600 Add: Preferred dividend 120 A Net Income Available common shareholder after 2720 the preferred share is converted Number of equity share outstanding now 560 Add: Additional common share from convertion of preferrence share (60*4) 240 B Total no of equity share after convertion 800 A/B Diluted Earning per share ($2720/800) 3.40

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