Question

Whispering Corporation earned $422,000 during a period when it had an average of 100,000 shares of common stock outstanding. The common stock sold at an average market price of $15 per share during the period. Also outstanding were 14,700 warrants that could be exercised to purchase one share of common stock for $10 for each warrant exercised. (a) Are the warrants dilutive? (b) Compute basic earnings per share. (Round answer to 2 decimal places, e.g. $2.55.) Basic earnings per share $ (c) Compute diluted earnings per share. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share $

Answer 1

a . Warrants are dilutive- Yes.

Explanation:- Warrants are the instruments that give the right to the holder to buy stock shares of issuing company at a fixed price. When an investor exercises their warrant, they receive newly issued stock shares.

Basic Earnings Per share Net 4mcome Average Autoramding shaxes $ 422000_ $ 4.22 pere 100000 share Diluted Earnings Per Share Ner Am come Average Ourobanding **Diluled Faneros Shared $422.000 0+ (14700x1) 422000 || 4700 $ 3.70 per have * Dilated Share 2 - 1 for 1 'warcant exercised 14700 x 2 14 700 mlores