At December 31, 2016, Labrador Ltd.had 800,000 common shares outstanding.In addition, the corporation had 300,000 non-cumulative preferred shares outstanding, which were convertible into 500,000 common shares.During 2017, Labrador paid cash dividends of $300,000 to the common shares and $200,000 to the preferred shares.Net income for 2017 was $1,200,000 and the income tax rate was 40%.Diluted earnings per share for 2017 is

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To calculate diluted EPS, first calculate basic EPS: ($1,200,000 - $200,000) / 800,000 = $1.25. For diluted EPS, assume conversion of preferred shares: $1,200,000 / (800,000 + 500,000) = $0.92.