DiCenta corporation reported net income of $270,000 in 2014 and had 50,000 shares of common stock outstanding throughout the year. Also outstanding all year were 5,000 shares of cumulative preferred stock, each convertible into 2 shares of common.. The preferred stock pays an annual dividend of $5 per share. DiCenta's tax rate is 40%. Compute DiCenta's 2014 diluted earnings per share.

$4.50

Explanation:

The computation of the diluted earning per share is shown below:

Diluted earning per share = (Net income) ÷ (Weighted average number of shares

where,

Net income = $270,000

Weighted average number of shares is

= 50,000 shares + 5,000 shares × 2 shares

= 50,000 shares + 10,000 shares

= 60,000 shares

Now the diluted earning per share is

= $270,000 ÷ 60,000 hours

= $4.50

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