Question - Peak Performance Inc. reported net income of $250,000 for the year ended December 31, 2009. Peak Performance Inc. had 40,000 shares of common stock outstanding throughout 2009. On July 1, 2008, Peak issued 5,000 stock options. Each stock option allows the holder to buy a share of stock for $10 and can be exercised after July 1, 2009. Various prices for the stock were as follows:
July 1, 2008 $ 9.00
January 1, 2009 9.50
December 31, 2009 12.50
Average price for 2009 10.87
Peak Performance has no preferred stock and a 30 percent income tax rate.
Required: Compute the basic EPS and the diluted EPS for Peak Performance Inc. for 2009.