Question

Dulce Corporation had 220,000 shares of common stock outstanding during the current year. There were also fully vested options for 10,500 shares of common stock were granted with an exercise price of $20. The market price of the common stock averaged $25 for the year. Net income was $4.5 million. What is diluted EPS? (Round your answer to 2 decimal places.)

Answer 1

$20.26

Step-by-step explanation:

The computation of diluted Earning per share is shown below:-

Shares for vested options = (Vested options × Exercise price) ÷ Common stock average

= (10,500 × $20) ÷ $25

= 8,400

Now,

Diluted Earning per share = Net income ÷ (Common stock shares + (Vested options - Shares for vested options))

= $4,500,000 ÷ (220,000 + (10,500 - 8,400)

= $4,500,000 ÷ (220,000 + 2,100)

= $4,500,000 ÷ 222,100

= $20.26

So, for computing the diluted Earning per share we simply applied the above formula.