McManus Inc

question 45

Multiple Choice

McManus Inc. reported net earnings of $800,000 for the year. McManus has 200,000 shares of common stock outstanding all year. On March 31, the company granted 40,000 stock options that allow employees to purchase 40,000 shares for $15 each. The company stock has averaged $20 in the market during the year. Compute the basic and diluted EPS.

• A) basic EPS $4.00; diluted EPS $3.81
• B) basic EPS $4.00; diluted EPS $4.00
• C) basic EPS $4.00; diluted EPS $3.86
• D) basic EPS $3.86; diluted EPS $3.86

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Definitions:

Supply Elastic

Relates to how much the quantity supplied of a good changes in response to changes in its price.

Recession

An economic downturn marked by a significant decline in activity across the economy, lasting more than a few months.

Demand Decline

A situation where the desire or willingness of consumers to purchase a particular good or service decreases over time.

Elastic Demand

A situation where the quantity demanded of a product changes significantly when its price changes.