A Firm Had 8,000 Common Shares Outstanding at the End

question 63

Multiple Choice

A firm had 8,000 common shares outstanding at the end of the current period and earned $8,000 that period (net of tax) .Also, options to purchase 5,000 shares at $5 each were outstanding all year.For the entire year the firm had $20,000 of 6% debt and $10,000 of 8% debt outstanding.The 8% debt is convertible into 500 common shares.The firm earns interest at 7 percent and has a 50 percent tax rate.The diluted earnings per share for the current year should be (rounded to the nearest cent) :

• A)$0.72
• B)$1.00
• C)$0.69
• D)$0.65

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Definitions:

Functional Residual Capacity

The volume of air remaining in the lungs after a normal, passive exhalation.

Expiratory Reserve Volume

The maximum volume of air that can be forcibly exhaled after the end of a normal exhalation.

Residual Volume

Residual Volume is the amount of air remaining in the lungs after a maximal exhalation, ensuring that gas exchange can continue even between breaths.

Inspiratory Reserve Volume

The volume of air in addition to the tidal volume that can be inhaled at maximum effort.