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Chapter 14

Example 4 cont.

Solution

Basic number of shares 6,000
60
Conversion: $5,000 × / $100 3,000
———
Adjusted number of shares 9,000

———
$ $
Basic earnings 1,200

Notional interest saved: $5,000 × 10% 500

Tax @ 30% (150)
——— 350
———

1,550
———

Diluted earnings per share = 1,550 ÷ 9,000 = 17.2¢

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