Hominem Inc. has 100,000 common shares outstanding. Net income was $1,500,000 for 2016. Hominem’s tax rate is 25%. The company had no discontinued operations. At the end of 2016, the market price of the company’s shares was $27. The company had these additional components in its capital structure at the end of the year:
· 15,000 cumulative preferred shares outstanding since 2012; each share is entitled to an annual dividend of $20 and is convertible into five shares of common stock.
· Outstanding options permitting the holder to buy 5,000 common shares for $23 per share were issued in 2015. These options can be exercised at any time before they expire in Dec 2020.
1. Compute basic EPS.
2. Compute diluted EPS.