income (prior to expensing share-based compensation) of
$48.53 billion.
FIGURE11.5EffectofEmployeeOptionExpensesonNet
Income
Source:Bear Stearns.
Dilution Effect
Whereasoptiongrantsinthecurrentyearreduceearningsfor
the year, the value of equity per share in a company is
weigheddownbythecumulativeeffectofoptionsthathave
beengrantedover time thatarestill outstanding.Although
someoftheseoptionsmaybeout-of-the-money,thereisstill
a probabilitythat theywillbe exercisedin thefuture,thus