Ute Co. had the following capital structure during 2005 and 2006:

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Preferred stock, $10 par, 4% cumulative, 25,000 shares issued and outstanding

$ 250,000

Common stock, $5 par, 200,000 shares issued and outstanding

1,000,000

Ute reported net income of $500,000 for the year ended December 31, 2006. Ute paid no preferred dividends during 2005 and paid $16,000 in preferred dividends during 2006. In its December 31, 2006 income statement, what amount should Ute report as basic earnings per share?

  1. $2.42
  2. $2.45
  3. $2.48
  4. $2.50