Vickrey Technology Has Had Net Income of $1,500,000 in the Current

question 11

Multiple Choice

Vickrey Technology has had net income of $1,500,000 in the current fiscal year. There are 1,000,000 shares of common stock outstanding along with convertible bonds, which have a total face value of $8 million. The $8 million is represented by 5,000 different $1,000 bonds. Each $1,000 bond pays 4% interest. The conversion ratio is 30. The firm is in a 30% tax bracket. What is Vickrey's "diluted earnings per share?"

• A)$1.43
• B)$1.81
• C)$2.00
• D)None of these options

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Definitions:

Fixed Cost

Costs that do not vary with the level of output or activity, such as rent or salaries.

Marginal Cost

The increased cost incurred from making one more unit of a product or service.

Average Total Cost

The total cost divided by the quantity of output produced, representing the average cost per unit of output.

Short-Run Supply Curve

A graphical representation showing the quantity of a good or service that producers are willing and able to sell at different prices over a short period, holding other factors constant.