diluted EPScan any one help me Example 4Diluted EPS In 2017

diluted EPS!can any one help me

Example 4-Diluted EPS: In 2017 Farrah Co. had a basic EPS of 105c based on earnings of $105,000 and 100,000 ordinary SI shares. It also had in issue $40,000 15% Convertible Loan Stock which is convertible in two years,time at the rate of 4 ordinary shares fo every $5 of stock. The rte of tax is 30%. In 2017 gross profit of $200,000 and expenses of $50,000 were recorded, including interest payable of $6,000. Calculate the diluted EPS

Solution

The additional equity on conversion of the loan stock = 40000*4/5 = 32000 shares

Saving of interest payments = 40000*15% =6000

This saving will be taxed, so after tax savings will be = 6000*(1-30%) = 4200

So earnings including after tax savings = 105000+4200 =109200

Outstanding shares for Diluted EPS = 100000+32000 =132000

Diluted EPS = Earnings for Diluted EPS / outstanding shares for Diluted EPS = 109200/132000 = 82.7c