Vimeo Corp.’s net income for 2011 is $90,000. The only potentially dilutive securities outstanding were 1,000 call options issued during 2010, with each option being exercisable for one share at $14. None have been exercised, and 50,000 common shares were outstanding during 2011. The average market price of the company’s shares during 2011 was $20.
Instructions
(a) Calculate diluted earnings per share for the year ended December 31, 2011 (round to nearest cent).
(b) Assuming that the 1,000 call options were instead issued on October 1, 2011 (rather than in 2010), calculate diluted earnings per share for the year ended December 31, 2011 (round to nearest cent). The average market price during the last three months of 2011 was $20.
(c) How would your answers for parts (a) and (b) change if, in addition to the information for parts (a) and (b), the company issued (wrote) 1,000 put options with an exercise price of $10?