Reference no: EM133169525
Question - Fury Road Company had the following capital structure on December 31, 2021:
7% bonds issued March 31, 2021. Each $100 bond is convertible to 1 common share $3,000,000
10% bonds issued January 1, 2018. $5,000,000
5% cumulative preferred shares (125,000 issued and outstanding) $1,000,000
Common shares (490,000 issued and outstanding) $4,000,000
On March 31, 2021, (the same day the 7% bonds were issued), $2,000,000 9% bonds were converted into 80,000 common shares.
At the beginning of the year, Fury Road shares were trading at $30 per share: on December 31, the shares were trading at $50 per share.
Fury Road compensates the corporation's executives and senior managers in part with options to purchase shares in the company. 20,000 options were issued on July 1, 2021, allowing the holder of each option to purchase one common share for $35.
Fury Road's after-tax net income for 2021 was $2 million, and the company is subject to a 40% tax rate.
Required -
1. Calculate Fury Road Company's basic earnings per share for 2021 (4 decimals).
2. Calculate Fury Road Company's diluted earnings per share for 2021 (4 decimals).
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