Your answer is incorrect. Try again. Venzuela Company\'s net income for 2014 is

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Your answer is incorrect. Try again. Venzuela Company's net income for 2014 is 547,600. The only potentially dilutive securities outstanding were 1,400 options issued during 2013, each exercisable for one share at S8. None has been exercised, and 11,100 shares of common were outstanding during 2014. The average market price of Venzuela's stock during 2014 was $20. Compute diluted earnings per share. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share Assume the same facts as those assumed for part (a), except that the 1,400 options were issued on October 1, 2014 (rather than in 2013). The average market price during the last months of 2014 was S20. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share

Explanation / Answer

a) Incremental shares that would be issued for no consideration if options were exercised = [20-8] * 1400/20 = 840 shares.

Total no of shares for diluted EPS = 11100+840 = 11940 shares

Diluted EPS = 47600/11940 = $3.99

b) As the options were issued only on 1st of October, the incremental shares would be 840*3/12 = 210

Diluted EPS will be: 47600/(11100+210) = $4.21

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