Example 3 Chapter 21 Solveiga – Diluted EPS

Dear Mike,

From dilution workings you get to the following:

Existing options: 3,000,000
2,400,000
Free shares 600,000

I don´t understand why 600,000 are free shares as the oustanding shares at year end are 4,000,000. Secondly I don´t know where 2,400,000 comes from and why this figure is substracted from the outstanding options.

I attempted example 5 where I find the same issue. I´m sure once this question is answered I will understand diluted workings in example 5 also.

Thank you very much.

Regards,

Isabel