1. Assumes that the proceeds from the exercise of stock options, warrants, etc will be used to repurchase treasury shares at the prevailing market price, resulting in an increase in shares outstanding.
If average price > exercise price, warrants or options are exercised at beginning of period = dilution
If average price < exercise price, warrants or options are not exercised = antidilutive or out of money
- Number of shares
- -(Number of shares x exercise price/avg market price)
- =Additional shares outstanding