Myers Drugs Inc. has 2 million shares of stock outstanding. Earnings after taxes are $8 million. Myers also has warrants outstanding that allow the holder to buy 100,000 shares of stock at $15 per share. The stock is currently selling for $50 per share.

a. Compute basic earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.)

b. Compute diluted earnings per share considering the possible impact of the warrants. Assume the cash proceeds are used to repuchase shares. (Do not round intermediate calculations and round your answer to 2 decimal places.)

Use the following formula:

Earnings after taxes

Shares outstanding + Assumed net increase in shares from the warrants