Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Transcribed Image Text:Myers Drugs Inc. has 2.5 million shares of stock outstanding. Earnings after taxes are $6 million. Myers also has warrants outstanding
that allow the holder to buy 100,000 shares of stock at $10 per share. The stock is currently selling for $50 per share.
a. Compute basic earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.)
Basic earnings per share
b. Compute diluted earnings per share considering the possible impact of the warrants. Assume the cash proceeds are used to
repuchase shares. (Do not round intermediate calculations and round your answer to 2 decimal places.)
Use the following formula:
Earnings after taxes
Shares outstanding + Assumed net increase in shares from the warrants
Diluted earnings per share
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