Question
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Crane Corporation reported net income of $311,750 in 2017 and had 199,000 shares of common stock...
Crane Corporation reported net income of $311,750 in 2017 and
had 199,000 shares of common stock outstanding throughout the year.
Also outstanding all year were 48,000 options to purchase common
stock at $10 per share. The average market price of the stock
during the year was $15.
Compute diluted earnings per share
Solutions
Expert Solution
Calculation of Diluted EPS
Considering, Treasury Stock Method, for options and warrants to purchase common stock.
Assumed, that options are exercised at the beginning of the period, at the average market price during the period.
Number of Outstanding Shares converted from Options= 48000 Shares
Total Number of Shares Outstanding = 199000 Shares + 48000 Shares
= 247000 Shares
Net Income $311,750
Weighted Average Number of shares Outstanding 247000 Shares
Diluted Earnings per Share $311,750 / 247,000 Shares $1.26
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