Question

A company has issued 100,000 options of which 50,000 are "in the money at an average exercise price of $15.00. The Company’s stock price is $25.00 per share. How many shares are dilutive and would affect the Company’s EPS calculation. Please show the calculation.

Answer 1

Answer:

20,000 shares

Explanation:

The computation of given question is shown below:-

Dilutive number of shares:-

Proceeds from the options issue = 50,000 × $15

= $750,000

Shares issued = 50,000

Treasury shares purchased from proceeds of the options

= ($750,000 ÷ $25)

= 30,000

Dilutive number of shares outstanding = Shares issued - Shares purchased back

50,000 - 30,000

= 20,000 shares