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Crowe Interior Designs of Santa Monica granted 300,000 qualified employee options on June 1 of the current year. The options allow employees to exchange each
Crowe Interior Designs of Santa Monica granted 300,000 qualified employee options on June 1 of the current year. The options allow employees to exchange each option for 36 shares of the company's common stock at an exercise price of $20 per share. The average market price of Crowe's common shares is $18 per share. Based on this information, compute the incremental shares to include in the denominator of the diluted earnings per share ratio. O A. There are no incremental shares in this case because the options are not in the money. Here, the market price is less than the exercise price, so it is cheaper to purchase the shares in the market than to exercise. We exclude the options from the diluted earnings per share computation because they are antidilutive. OB. 10,800,000 incremental shares should be included in the denominator of the diluted earnings per share ratio. C. 1,200,000 incremental shares should be included in the denominator of the diluted earnings per share ratio. D. There are no incremental shares in this case because the options are dilutive. Here, the market price is less than the exercise price, so it is cheaper to purchase the shares in the market than to exercise
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