1. (14 pts) Bayou Energy Inc. had 200,000 shares of common stock outstanding at the end of 2016. Bayou Energy also had 10,000 shares of 6%, $50 par non-convertible preferred stock outstanding throughout the year. During 2017, the following transactions on common stock took place.

Mar. 1, 2017, Purchase of 30,000 treasury shares

June 1, 2017, Stock split 2 for 1

Nov. 1, 2017, Issuance of 45,000 shares

In addition, Bayou Energy has the following potentially dilutive securities.

Stock options: Exercise price on stock option is $20 per share. Average market price in 2017 was $30 (market price and exercise price adjusted for split). Total number of options is 12,000 shares.

8.0% convertible bonds: $1,000,000, sold at par on July 1 of the current year, convertible into 40 shares common for each $1,000 bond (adjusted for split).

Bayou Energy declared the required preferred stock dividend during the year. Net income for the year was $773,600. Assume that applicable tax rate for 2017 is 35%. Bayous fiscal year ends December 31.

a)(8 pts) Compute the basic earnings per share for 2017. (Round to the nearest penny.)

Weighted average shares outstanding during the year for Basic EPS:

Basic EPS =

b) (6 pts) Compute the diluted earnings per share for 2017. (Round to the nearest penny.)