Venzuela Company’s net income for 2020 is $50,000. The only potentially dilutive securities outstanding were 1,000 options issued during 2019, each exercisable for one share at $6. None has been exercised, and 10,000 shares of common were outstanding during 2020. The average market price of Venzuela’s stock during 2020 was $20.(a) Compute diluted earnings per share. (Round answer to 2 decimal places, e. g. $2.55.)

Answer explained below

Explanation:

GIVEN:

options issued = 1000

exercise per share = $6

market price = $20

net income = $50000

a) Diluted earnings per share

= (Total income - preference dividends) /( outstanding shares + diluted shares)

Amount paid towards shares = Options issued * Exercise price per share = 1,000 * 6 = $ 6,000

Value of options = Amount paid towards shares / Current market price = $ 6,000 /$ 20 = 300

Diluted shares = Options issued - value of options = 1000 - 300 = 700

So Diluted Earnings per share = ( 50,000) / ( 10,000 +700) = $ 4.67 per share.

b) Calculation of diluted shares 700 (same as above )

Weighted average for the period holding i.e, 3 months = 700 *3/12 = 175 shares increased during the period.

Diluted EPS = 50,000 /(10,000 +175) = $ 4.91 per share

this business is a price setter.

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start by isolating the variable on one side by adding 43w^2 to both sides.   the equation will read:

25w^2+5=0

*subtract 5 from both sides*

25w^2=-5

*divide both sides by 25*

w^2=-1/5

*take the square root of both sides*

w=√(-1/5)

the square root of -1 is i.   the square root of 5 remains √5

the answer is i/√5.

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