Chapter 9, Problem 103.3C

To determine

Concept introduction:

Basic Earnings per share:

The Basic Earnings per share is the amount of net income earned by each common share outstanding. The Earnings per share calculated by with help of following formula:

$\text{Basic Earnings per share=}\frac{\text{Net Income - Preferred Dividend}}{\text{Weighted Average Common Shares Outstanding}}$

$\begin{array}{l} \hfill \\ NetIncomeavailabletocommonstockholder=Netincome–PreferredDividend\hfill \end{array}$

To indicate:

If the leverage would be advantageous to the shareholders if the income from operations increase by only $150,000.