CFA Level 1 Exam

3959 Questions

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Question No. 1

New Gestalt, Inc., a software firm had a net income of 1.7 million last year. It has 200,000 common shares and

300,000 convertible bonds with face value of 100 outstanding. The convertible bonds carry a coupon of 4% and
can be converted one-for-one. The average stock price last year was 39 and the maximum price was 57. The
effective interest rate on the convertible debt is 8%. New Gestalt issued 100,000 preferred shares with face
value 100 and a coupon of 5% on March 31st of last year. Assume the convertible bonds are dilutive and that
New Gestalt faces a 30% tax rate. Given the above, New Gestalt's Basic EPS equals ________.
Choose the correct option from the given list.
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