During 2014, Penny Co

question 13

Multiple Choice

During 2014, Penny Co. had net income of $200,000 including after-tax interest expense of $30,000 on convertible bonds. The $300,000 face value of convertible bonds can be converted into common stock at the rate of 300 shares per $1,000 bond. Prior to the conversion, there were 400,000 shares of common stock outstanding. The fully diluted earnings per share is

• A) $0.50
• B) $0.469
• C) $0.408
• D) not determinable because the bonds are not dilutive

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Definitions:

Deregulated

Refers to the reduction or elimination of government power in a particular industry, usually to create more competition and increase efficiency.

Post Hoc

Post hoc, short for "post hoc ergo propter hoc," is a logical fallacy that assumes a cause-and-effect relationship simply because one event follows another.

Ergo Propter Hoc

A logical fallacy meaning "therefore, because of this," suggesting a cause-and-effect relationship where none exists.

Fallacy

A mistaken belief, especially one based on unsound arguments or logical errors.