Use the table for the question(s)below.
-Consider the above Income Statement for CharmCorp. All values are in millions of dollars. If CharmCorp has 6 million shares outstanding, and its managers and employees have stock options for 1 million shares, what is its diluted EPS in 2018?
A)$2.33
B)$2.00
C)$1.67
D)$1.42

Question

Use the table for the question(s)below. 
-Consider the above Income Statement for CharmCorp. All values are in millions of dollars. If CharmCorp has 6 million shares outstanding, and its managers and employees have stock options for 1 million shares, what is its diluted EPS in 2018?
A)$2.33 
B)$2.00 
C)$1.67 
D)$1.42

Quizplus · Accepted Answer

To calculate the diluted EPS, we first need to consider the total potential shares outstanding, which includes both the current shares outstanding and the shares that could be created from stock options. In this case, that's 6 million shares outstanding + 1 million from stock options = 7 million shares in total. Without the specific income statement details, we can't calculate the exact net income. However, to find the diluted EPS, you divide the net income by the total potential shares outstanding. Given the options, the only logical choice that represents a decrease in EPS due to the dilution from the additional 1 million shares is $2.00, as it would be lower than the basic EPS (which is not provided but implied to be higher).

Use the Table for the Question(s)below