1. The following applies to the Dunbar Corp for 2010: Shares Transactions in Common Shares Change Outstanding 1/1/10, Beginning Shares Outstanding 1,000,000 3/1/10, Purchase of Treasury

1. The following applies to the Dunbar Corp for 2010:

Shares

Transactions in Common Shares Change Outstanding

1/1/10, Beginning Shares Outstanding 1,000,000

3/1/10, Purchase of Treasury Shares (60,000) 940,000

6/1/10, Stock Split 2-for-1 940,000 1,880,000

11/1/10, Issuance of Additional Shares 120,000 2,000,000

Outstanding Stock Options (Granted in 2008)

Of the 70,000 outstanding options granted in 2008, 60,000 shares are exercisable at the option price of $25 per share and 10,000 shares are exercisable at the option price of $35 per share. Average 2010 market price was $30 per share. (Market price and option price already adjusted for stock split).

Convertible Bonds (Issued December 1, 2010)

$5 million of 4% bonds convertible to 400,000 shares of common stock.

Net income in 2010 was $3,200,000. Dunbar’s tax rate is 35%

A) Compute the basic earnings per share for 2010.

B) Compute the diluted earnings per share for 2010.

C) Let’s assume Dunbar Corp made a net loss of $3.2 million in 2010 instead of a net income, compute the basic and diluted earnings per share.

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