Information from the financial statements of Henderson-Niles Industries included
ID: 2596771 • Letter: I
Question
Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2016:
Henderson-Niles’ net income for the year ended December 31, 2016, is $600 million. The income tax rate is 40%. Henderson-Niles paid dividends of $2 per share on its preferred stock during 2016.
Compute basic and diluted earnings per share for the year ended December 31, 2016. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
Basic =
Diluted =
Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2016:
Explanation / Answer
Basic EPS = Net Income - Preference Dividends / Number of shares outstanding
= $600 - (65 * 2) / 100 = 600 - 130 / 100 = $4.70 per share
Diluted EPS = Net Income - Preference Dividends / Number of shares outstanding + Diluted shares
= 600 - 130 / 100 + 40 + 13.5 = 470 / 153.5 = $3.06 per share
Diluted shares are those bonds or preferred shares that can be converted into common shares.