The 20X3 net income of Mack was $100,000, and 100,000 shares of its common stock were outstanding during the entire year. In addition, there were outstanding options to purchase 10,000 shares of common stock at $10 per share. These options were granted in 20X1, and none had been exercised by December 31, 20X3. Market prices of Mack's common stock during 20X3 were: January 1 $20 per share December 31 $40 per share Average price $25 per share The amount that should be shown as Mack's diluted EPS for 20X3 is (rounded to the nearest cent): * A. $0.94 ($100,000 / 106,000 shares) * B. $0.91 ($100,000 / 110,000 shares) * C. $0.93 ($100,000 / 107,500 shares) * D. $0.95 ($100,000 / 105,000 shares) Study Unit 8: A.2. Profitability Ratios III: Diluted Earnings Per Share covers the information for this question.
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The options are in-the-money because the exercise price of $10 is less than the average market price of $25. Therefore, they are assumed to be exercised, and the proceeds are assumed to be used to repurchase shares at the average market price. The number of Show more…
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On December 31, 2023, Berclair Incorporated had 260 million shares of common stock and 6 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2024, Berclair purchased 48 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2024. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2024, was $300 million. Also outstanding at December 31 were 30 million incentive stock options granted to key executives on September 13, 2019. The options were exercisable as of September 13, 2023, for 30 million common shares at an exercise price of $56 per share. During 2024, the market price of the common shares averaged $70 per share. Required: Compute Berclair's basic and diluted earnings per share for the year ended December 31, 2024. (Shares for stock options and conversion of convertible securities have been adjusted for any stock split or stock dividend.) Note: Do not round intermediate calculations. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).
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