Computing Earnings per Share: Stock Options Falcon Company has a compensatory stock option plan under which options to buy 459,000 common shares were issued in Year 1. These options are exercisable during Year 2 and Year 3 at $29 per share. In Year 2, Falcon reported net income of $900,000; the companys capital structure remained unchanged that year. Outstanding stock consists of 1,800,000 common shares, which traded at an average price of $36 per share throughout Year 2