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28 October, 00:44

Culver Corporation earned $262,000 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 13,500 warrants that could be exercised to purchase one share of common stock for $10 for each warrant exercised. (a) Are the warrants dilutive?

(b) Compute basic earnings per share. (Round answer to 2 decimal places, e. g. $2.55.)

(c) Compute diluted earnings per share.

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  1. 28 October, 00:45
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    a) The warrant are Dilutive

    b) Basic EPS $2.62

    c) Diluteed EPS = $2.31

    Explanation:

    a) The warrants are dilute because the cost of exercising the rights is lover than the market price

    b) Basic Eps = Total Earning/Share Outstanding = $262,000/100,000 = $2.62

    c) Diluted Eps = Earnings / (Shares outstanding+potential shares)

    = $262,000 / (100,000+13,500) = $2.31
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