Question 7)

Value Co has 80 million shares outstanding. Value Cos shares are trading at $20 per share. Value Cos net income is $100 million. Value Co has two tranches of stock options issued to its management. The first tranche consists of 10 million call options with an exercise price of $15. The second tranche consists of 20 million call options with an exercise price of $25. You use the treasury stock method to account for these stock options when calculating the diluted number of shares outstanding. When using the diluted number of shares outstanding, what is Value Cos PE ratio?

Group of answer choices

a) 17.0x

b) 16.5x

c) None of the other answers is correct.

d) 17.5x

e) 16.0x