Answer:
The number of shares that will be added to the denominator of diluted EPS for Year 1 is 6,000 shares
Explanation:
For computing the added shares, first we have to compute per year expenses, than repurchased shares, afterwards, final amount will be come
Per year expenses = (Number of shares × price per share) ÷ (Vesting period)
= (10,000 shares × $10) ÷ (5 years)
= $20,000
The remaining expenses after one year would be equal to
= Total expenses - annual expenses
= $100,000 - $20,000
= $80,000
Now the repurchased shares would be
= (Remaining expenses) ÷ (average market price)
= ($80,000) ÷ ($20)
= 4,000 shares
So, the diluted shares would be
= 10,000 shares - 4,000 shares
= 6,000 shares
