The Following Information Was Extracted from Smurm Corporation's 2006 Annual

question 38

Multiple Choice

The following information was extracted from Smurm Corporation's 2006 annual report:
$\begin{array}{l}\begin{array}{|l|r|}\hline\text { Common stock }\\\hline \text { Shares outstanding } 12 / 31 / 05 & 90 \text { Million } \\\hline \text { New shares issued } 4 / 1 / 06 & 10 \text { Million } \\\hline \text { Shares outstanding } 12 / 31 / 06 & 100 \text { Million } \\\hline \text { Preferred stock } & \\\hline \$ 10 \text { par, } 10\% \text {, convertible into } 2 \text { shares of common stock, shares } & \\\hline \text {Outstanding }&50 Million\\\hline \text {Options }\\\hline \text { 1 Million options, each to purchase one common share at \( \$ 50 \) per}\\\hline \text {Share }\\\hline \text {Market price of stock }\\\hline \text { Average for year}& \$ 75 \\\hline \text { Beginning of year}& \$ 70\\\hline \text {End of year }&\$ 78\\\hline \text { Preferred dividends paid}&\$ 50,000,000 \\\hline \text {Net Income for 2006 }&\$ 350,000,000\\\hline\end{array}\end{array}$
-Using the treasury stock method, the options would result in how many extra shares being recognized in the diluted EPS calculation:

• A) 500,000
• B) 358,975
• C) 333,333
• D) 285,714

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Definitions:

Standard Deviation

A technique for quantifying the degree of variation or gap among a batch of numbers.

Random Sample

A random sample is a subset of individuals chosen from a larger population where each member has an equal chance of being selected, ensuring the representativeness of the sample.

β Recalculate

A process of recalculating the beta coefficient, which measures an investment's volatility compared to the market.

Hypotheses Testing

A method in statistics used to determine whether there is enough evidence in a sample of data to infer that a certain condition holds for the entire population.