M Inc. issued 2,000 convertible bonds in 2009 at a coupon rate of 8% and a par value of 1,000. Each bond is convertible into M Inc.s common stock at 25 per share.

M Inc. expected the stock price to rise rapidly after the convertible was issued and lead to a quick conversion of the bond debt into equity. However, a recessionary climate has prevented that from happening, and the bonds are still outstanding. In 2010 M Inc. had net income of 3 million. One million share of its stock were outstanding for the entire year, and its marginal tax rate is 40%.

Calculate M Inc.s basic and diluted EPS. (Diluted EPS assumes all convertible bonds are converted at the beginning of the year)