Ehrlich Corporation earned $360,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of $15 per share during the period. Also outstanding were 15,000 warrants that could be exercised to purchase one share of common stock for $10 for each warrant exercised. Instructions a. Are the warrants dilutive? b. Compute basic earnings per share. c. Compute diluted earnings per share.
Ehrlich Corporation earned $360,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of $15 per share during the period. Also outstanding were 15,000 warrants that could be exercised to purchase one share of common stock for $10 for each warrant exercised. Instructions a. Are the warrants dilutive? b. Compute basic earnings per share. c. Compute diluted earnings per share.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Ehrlich Corporation earned $360,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of $15 per share during the period. Also outstanding were 15,000 warrants that could be exercised to purchase one share of common stock for $10 for each warrant exercised.
Instructions
a. Are the warrants dilutive?
b. Compute basic earnings per share.
c. Compute diluted earnings per share.
Expert Solution
Step 1
Introduction:-
The following formula used as follows under:-
Basic earnings per share
= (Net income - preferred dividend) / No. of common stock outstanding
Diluted earnings per share
= Net income / (No. of common stock outstanding + Incremental shares)
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