Homework Answers
| Basic EPS = $6.90 |
| Diluted EPS = $5.92 |
Working:
| 1. Basic EPS |
| Basic EPS = Porter Income + Street Income - Amortization Expense / Shares Outstanding |
| Basic EPS =(259000+234000-10000)/70000 |
| Basic EPS = 483000 / 70000 |
| Basic EPS = $6.90 |
| 2 .Diluted EPS |
| Streets BPS = Earnings - Amortization / Shares Outstanding |
| Streets BPS =(234000-10000)/35000 |
| Streets BPS = $6.40 |
| Streets DPS = Earnings + Interest Saved - Amortization / Shares Outstanding + Bond |
| Streets DPS =(234000+36000-10000)/(35000+15000) |
| Streets DPS = $5.20 |
| Because diluted earnings per share is Less than basic earnings per share, the convertible bonds are dilutive and should be included. |
| Porters Shares in Streets Dilutive Income |
| Porter Share in Street Earnings = Streets Dilutive Income * Shares Owned by Porter / Total Shares of Street after conversion |
| Streets Dilitive Income = =(234000+36000-10000) = 260,000 |
| Porter Share in Street Earnings = 260000 * 35000 / 50000 |
| Porter Share in Street Earnings = $182000 |
| Porters DPS = Income of Porter + 182000 + Interest / (Shares o/s + Bond Conversion) |
| Porters DPS =(259000+182000+56000)/(70000+14000) |
| Porters DPS = $5.92 |
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