Owl Co
Subject:AccountingPrice:2.87 Bought7
Owl Co. has 200,000 common shares, 100,000 common stock options, and 20,000 shares of $100,5% cumulative preferred stock, all outstanding during 2020. The stock option exercise price is $10 and average market price is $20. Also, in 2020, Owl has net income of $700,000 and declared no dividends. What's 2020 Diluted EPS?
$2.50
$2.80
$2.00
$2.40
$2.20
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Answer:
Proceeds received on exercise = 100000 x $10 = $1000000
Shares repurchased = $1000000/$20 = 50000 shares
Diluted EPS = (Net income - preferred dividend) / (No. of common shares outstanding + Potential shares)
= ($700000 - 20000*$100*5%)/(100000+50000 shares)
= $2.40 per shares
