A company had 2 million common shares outstanding throughout the last year. Total dividends of $1 million were paid to common stockholders and dividends of $400,000 were paid to preferred stockholders. Net income was $6 million and the tax rate was 40%. The company also had 100,000 options on common stock outstanding throughout the period; the exercise price is $20.00. The average share price over the year was $27.00 and the end year price was $35.00. The diluted earnings per share was closest to:

Group of answer choices

a. $2.74.

b. $2.76.

c. $2.96.