Answer-
a) Diluted earnings per share
= (Total income - preference dividends) /( outstanding shares + diluted shares)
Amount paid towards shares = Options issued * Exercise price per share = 1,200 * 6 = $ 7,200
Value of options = Amount paid towards shares / Current market price = $ 7,200 /$ 20 = 360
Diluted shares = Options issued - value of options = 1200 - 360 = 840
So Diluted Earnings per share = ( 52,300) / ( 9,300 +840) = $ 5. 16 per share.
b) Caluculation of diluted shares 840 (same as above )
Weighted average for the period holding i.e, 3 months = 840 *3/12 = 210 shares increased during the period.
Diluted EPS = 52,300 /(9,300 +210) = $ 5.50 per share
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