Hi,

I was trying to solve a question on Diluted EPS, on Schweser Note. Correct answer is C, but my answer is different from the official one. I know I might wrong, but I don’t know how. Why the correct answer calculate ($55-$50) at numerator ? Could you please explain to me? Thank you

Best regards,

Q.

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Following is the question.

*Given the following information, how many shares should be used in computing diluted EPS?*

*300,000 shares outstanding.**100,000 warrants exercisable at $50 per share.**Average share price is $55.**Year-end share price is $60.*

*A. 9,091. B. 90,909. C. 309,091.*

Official Answers:

**C** is correct. Since the exercise price of the warrants is less than the average share price, the warrants are dilutive. Using the treasury stock method to determine the denominator impact:

**（$55 - $50）** / $55 * 100k shares = **9091 shares.**

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My opinion: ( **$50** / $55) * 100k shares = **90910 shares.** Why the correct answer calculate ($55-$50) at numerator ?