What will be the diluted EPS if average stock price during the year is $35 and treasury shares that can be purchased are 1000?
A) $3
B) $5
C) $6
D) $4.17

Question

Quizplus · Accepted Answer

To calculate the diluted EPS, we need to assume that the treasury shares are purchased and turned into common shares. If there are 1000 treasury shares, we add 1000 to the denominator (weighted average number of shares outstanding). 
Diluted EPS = (Net Income - Preferred Stock Dividends) / (Weighted average number of shares outstanding + Treasury Shares)
Since we do not have the net income or preferred stock dividend information, we cannot find the exact diluted EPS. However, we can eliminate choices A, B, and C as they are too high compared to the initial EPS. The only remaining choice is D, which is about the same as the initial EPS of $4. Therefore, the best answer is D.

What Will Be the Diluted EPS If Average Stock Price