To compute Jupiter’s basic earnings per share (EPS) use the formula: (net income − preferred dividends) / weighted average common shares outstanding. Weighted average common shares outstanding = [(115,000 × 12) + (60,000 × 9) – (45,000 × 3)] / 12 = 148,750. Basic EPS = $18,300,000 / 148,750 = $123.02.

Using the treasury stock method, if the warrants were exercised cash inflow would be 200 × $100 × 100 = $2,000,000. The number of Jupiter shares that can be purchased with this cash at the average share price is $2,000,000 / $150 = 13,333. The net number of shares that would have been created is 20,000 − 13,333 = 6,667. Diluted EPS = $18,300,000 / (148,750 + 6,667) = $117.75. Since diluted EPS is less than basic EPS, the warrants are dilutive.