Answer: $4.82
Explanation: Diluted EPS is a calculation used to gauge the quality of a company's earnings per share (EPS) if all convertible securities were exercised. It can be said to be a profitability calculation that measures the amount of income each share will receive if all of the diluted securities are realized
From the above question, the DEPS is calculated thus:
Proceeds from unexercise call options(20,000 shares × $20)=$400,000
Treasury shares = $400,000/$25 = 16,000
Purchased shares = 20,000 -16,000 = 4,000
Therefore Incremental shares = 4,000
The incremental shares of 4,000 + 100,000+10% stock dividend of 10,000 = 114,000 shares.
DEPS = $550,000/114,000 = 4.82
