(EPS with Options, Various Situations) Zambrano Company’s net income for 2010 is $40,000. The only potentially dilutive securities outstanding were 1,000 options issued during 2009, each exercisable for one share at $8. None has been exercised, and 10,000 shares of common were outstanding during 2010. The average market price of Zambrano’s stock during 2010 was $20.

(a) Compute diluted earnings per share. (Round to the nearest cent)

(b) Assume the same facts as those assumed for part (a), except that the 1,000 options were issued on October 1, 2010 (rather than in 2009). The average market price during the last 3 months of 2010 was $20.