Income Statement for CharmCorp: 2008 2009 Total sales 600 540 Cost of sales -532
ID: 2656150 • Letter: I
Question
Income Statement for CharmCorp:
2008 2009
Total sales 600 540
Cost of sales -532 -488
Gross Profit 68 52
Selling, general,
and administrative expenses -36 -21
Research and development -4 -5
Depreciation and amortization -5 -5
Operating Income 23 21
Other income 1 5
Earnings before interest
and taxes (EBIT) 24 26
Interest income (expense) -7 -7
Pretax income 14 19
Taxes -4 5
Net Income 10 14
Consider the above Income Statement for CharmCorp. All values are in millions of dollars. If CharmCorp. has 4 million shares outstanding, and its managers and employees have stock options for 2 million shares, what is its diluted EPS in 2008?
A) $3.5
B) $2.5
C) $1.67
D) $2.33
E) $4.00
F) None of the above
A) $3.5
B) $2.5
C) $1.67
D) $2.33
E) $4.00
F) None of the above
Explanation / Answer
Correct option is > C) $1.67
.
Diluted EPS for 2008 = Net income 2008 in million / (Outstanding shares in million + Employee Stock option shares in million)
Diluted EPS for 2008 = 10 / (4 + 2)
Diluted EPS for 2008 = $1.67