Fully vested incentive stock options for 99,000 shares of common stock at an exe

Question

Fully vested incentive stock options for 99,000 shares of common stock at an exercise price of $49 were outstanding for the entire year. The market price of the stock during the year averaged $55.

By how many shares will the assumed exercise of these options increase the weighted-average number of shares outstanding when calculating diluted earnings per share?

Fully vested incentive stock options for 99,000 shares of common stock at an exercise price of $49 were outstanding for the entire year. The market price of the stock during the year averaged $55.

Explanation / Answer

Answer:

Exercise price to get 99,000 shares is $49,

So total amount will be

=99,000 x 49

=$4,851,000

but markate price is $55

So umbe of shares purchased

= 4851000/55

=88,200

so here company can purchase only 88,200 shares as per market rate

Increase in weighted average number of share

=99,000-88,200

=10,800 shares

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