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?
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
A) $0.83
B) $1.33
C) $1.67
D) $2.00
Answer: C
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