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on january 1, 2021, black inc. issued stock options for 230,000 shares to a division manager. the options have an estimated fair value of $6 each. to provide additional incentive for managerial achievement, the options are not exercisable unless divisional revenue increases by 4% in two years. black initially estimates that it is probable the goal will be achieved. in 2022, after one year, black estimates that it is not probable that divisional revenue will increase by 4% in two years. ignoring taxes, what is the effect on earnings in 2022?

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tutorconsortium113

The correct answer is $690,000 (increase).In the case of a repurchase, earnings per share rise when the total number of outstanding shares falls.

What is the effect on earnings ?

In the case of a repurchase, earnings per share rise when the total number of outstanding shares falls.When costs are reduced and a firm is able to grow sales, both the company's earnings and sales are increased.

According to the scenario, computation of the given data are as follows:

Stock issued =230,000 shares

Fair value = $6

Time period = 2years

So, we can calculate the effect on earnings by using following formula:

Effects on earning = Stock issued × Fair value ÷ Time period

By putting the value, we get

Effects on earning = 230,000 × 6 ÷ 2

= 690,000 (Increase)

To learn more about Effects on earning refer

https://brainly.com/question/16002421

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