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Answer
| Increase in Earnings | Increase in no. of Equity Shares | earnings per incremental shares | |
| 10% convertible bonds | 1,000,000 | ||
| Conversion in to equity shares | 82,000 | ||
| Interest savings @10% | 100,000 | ||
| Tax @28% | 28,000 | ||
| Interest savings (net of tax) | 72,000 | 82,000 | $ 0.878 |
| Potentially Dilutive Security | Incremental Numerator Effect | Incremental Denominator Effect | EPS |
| 10% Bonds | 72,000 | 82,000 | $ 0.878 |
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●
386,500 common shares
●
19,500 Class A $3 cumulative preferred shares that were
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●
52,000 Class B $4 non-cumulative preferred shares that were
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shares.
●
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items were outstanding:
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386,500 common shares
●
19,500 Class A $3 cumulative preferred shares that were
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●
52,000 Class B $4 non-cumulative preferred shares that were
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●
$504,000, 8% bonds that were convertible to 14,000 common
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