[benjamine]

How can I calculate Basic EPS and diluted EPS in regards of the following proble,

At Jan. 1 and Dec. 31,2005. Wonderland co. has the following securities outstanding:

5% convertible bonds, $1,000 face amount $1,000,000,000. Convertible into 30 million shares of common stock
10 million 8% cumulative, convertible preferred shares, $40 par value, convertible into 20 million shares of common stock

20 million 6% convertible preferred stock, $50 par value, convertible into 30 million shares of common stock.

100 million options to buy common stock at $30 per share
150 million options to buy common stock at $35 per share
800 million shares of common stock, $ 20 par value
Net income for 2005 was $ 1600 million and the tax rate was 25%

Wonderland has paid all preferred dividends

common stock prices:
average for the yr. $40
closing price for the yr. $32

How can I calculate basic EPS and diluted EPS?

[Just Looking]

Basic EPS is computed on the number of shares outstanding (that is, actually issued) at the time. Diluted EPS is based on the number of shares that theoretically could exist by computing the shares a business would have generated if all stock options, warrants, convertibles, and other potential sources of dilution that were currently exercisable were invoked.

In your example there are currently 800 million shares - this is used to compute basic. To look at the theoretical shares, add all the possibilities to this number - e.g. the 30 mill in convertible bonds, the 50 mill in conv pref shares, and the options.

[benjamine]

OK, just to verify: basic EPS= 1600/800= $2 and diluted EPS= 1600+32.5/800+25+18.75+30+20= $1.86.
I excluded 20 million 6% convertible preferred stock, $50 par value since is antidillutive , correct?