Diluted EPS and Stock Options

The company had 181,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the company had issued stock options that allowed employees to purchase 47,000 shares of common stock. The option exercise price is $12 per share. The company has no other potentially dilutive securities. Net income for the year was $390,000. In your computations, round all weighted-average number of shares to the nearest whole number. Round earnings per share to the nearest cent.

Compute diluted earnings per share, assuming that the average stock price for the year was $16.

Compute diluted earnings per share, assuming that the average stock price for the year was $10.

Please explain how you got your answer. Thank you!