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diluted eps

This topic has 1 reply, 2 voices, and was last updated 12 years ago by MikeLittle.

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November 9, 2012 at 4:45 pm #55143
maria62
Member
- Topics: 5
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Dear Mike,
A question says: the directors of Rebound were granted options to buy 2million shares in the company for $1 each. The average market price of Rebound’s shares for the year ended was $2.50. What is the effect in calculating diluted eps? The answer says that i will add 1200 to ordinary shares. I thought that only 800 should be added(2m/$2.5)Why?
Thanks!
November 10, 2012 at 12:00 am #106927
MikeLittle
Keymaster
- Topics: 27
- Replies: 23318
Set your working out like this:
2,000,000 @ $1 = $2,000,000
which is the equivalent of
800,000 @ $2.50 = $2,000,000
and
1,200,000 @ $0 ie free
and it’s these “free” shares which are diluting, not the 800 equivalently issued at full market price
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