Zambrano plc net income for 2022 is £40,000. The only potentially dilutive securities outstanding were 1,000 options issued during 2021, each exercisable for one share at £8. None has been exercised, and 10,000 ordinary shares were outstanding during 2022. The average market price of Zambrano’s shares during 2022 was £20.

Instructions

a. Compute diluted earnings per share. (Round to two decimal places.)

b. Assume the same facts as those assumed for part (a), except that the 1,000 options were issued on October 1, 2022 (rather than in 2021). The average market price during the last 3 months of 2022 was £20.