1. Cedalion Corporation had 360,000 shares of common stock outstanding at January 1, 2017. On March 1, 2017, Cedalion repurchased and promptly retired 20,000 shares of its own stock. On June 1, 2017, the company declared 1.5 for 1 stock split. Lastly, on November 1, 2017, the company issued 90,000 shares of common stock. In addition to common stock, Cedalion had 12,500 shares of 5% cumulative convertible preferred stock, par value $20 each, and each preferred share convertible into 10 shares of common stock. Furthermore, Cedalion had 75,000 outstanding stock options, exercisable at $22 per share. Average market price in 2017 was $30 per share. All numbers for preferred shares and for stock options are already adjusted for the stock split. NET INCOME for the year 2017 was 2,175,000.

a) Compute the basic earnings per share for year 2017 [7 points]

b) Compute the diluted earnings per share for year 2017 [13 points]