Diluted Earnings per Share—Complex Capital Structure
Carrizo Corporation’s capital structure is as follows:
|
|
December 31, |
|
|
|
2009 |
2008 |
|
Outstanding shares of: |
|
|
|
Common stock |
336,000 |
280,000 |
|
Nonconvertible, noncumulative preferred stock |
10,000 |
10,000 |
|
10% convertible bonds |
$1,000,000 |
$1,000,000 |
The following additional information is available.
(a) On September 1, 2009, Carrizo sold 56,000 additional shares of common stock.
(b) Net income for the year ended December 31, 2009, was $860,000.
(c) During 2009, Carrizo declared and paid dividends of $5 per share on its preferred stock.
(d) The 10% bonds are convertible into 40 shares of common stock for each $1,000 bond.
(e) Unexercised options to purchase 30,000 shares of common stock at $22.50 per share were outstanding at the beginning and end of 2009. The average market price of Carrizo’s common stock during 2009 was $36 per share.
(f) Warrants to purchase 20,000 shares of common stock at $38 per share were attached to the preferred stock at the time of issuance. The warrants, which expire on December 31, 2014, were outstanding at December 31, 2009.
(g) Carrizo’s effective income tax rate was 30% for 2008 and 2009.
Instructions:
1. For the year ended December 31, 2009, compute basic EPS.
2. Compute diluted EPS for 2009.