A firm has warrants outstanding for investors to purchase 50,000 shares at $25 per share. The current stock price is $40. The firm has l million shares outstanding and earnings per share of $1.50. What are earnings per share when all these warrants are exercised?

Question

Quizplus · Accepted Answer

Before exercise: Earnings/share = Earnings X Shares out= 1,000,000 shares X $1.50/share = $1,500,000; shares outstanding = 1,000,000After exercise: EPS = $1,500,000, shares out = 1, 018,750EPS = $1,500,000/1,018,750 shares = $1.47

A Firm Has Warrants Outstanding for Investors to Purchase 50,000