Calculating EPS Using the Treasury Stock Method

The Treasury Stock Method of Calculating EPS

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The "Treasury Stock" method of calculating EPS involves:

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A. B. C. D.

B

In the Treasury stock method, it is assumed that the proceeds from the exercise of warrants and employee call options are used to repurchase shares at the average market price during the period. Considering call option exercise when the average stock price is below strike price is incorrect since it is an irrational strategy and leads to anti-dilution of EPS.