Assume all bonds in the following problem have a par value of $1,000.

 
Online Network Inc. has net income of $650,000 in the current fiscal year. There are 100,000 shares of common stock outstanding along with convertible bonds, which have a total face value of $1.6 million. The $1.6 million is represented by 1,600 different $1,000 bonds. Each $1,000 bond pays 6 percent interest. The conversion ratio is 10. The firm is in a 30 percent tax bracket.

 
a. Compute basic earnings per share.

 
b. Compute diluted earnings per share.